Real Entrepreneurs & Real Visions

It’s funny what can happen to an entrepreneur as time passes. My first encounter with most entrepreneurs is pretty exciting. They pitch their vision to me and tell me about how they’re going to change the world. Independent of what their vision is, I love this attitude, and I consider this mindset an absolute requirement for anyone who has a chance of succeeding.

Fast forward six months, a year, three years, and you’ll almost always see a major transformation. If successful, the entrepreneur usually emits a confidence in their abilities and optimism in their vision. If they’re not really that successful, which is the case for most entrepreneurs, they flip a mental switch and begin to reek of unmistakable complacency and mild optimism for a lukewarm vision. Gone is the vision, reality has set in.

One might think that this gradual fatalism is caused by the bitter realities of entrepreneurship and the infinite challenges of creating value, but I think it is just the opposite. I think that most downtrodden entrepreneurs get that way because they allow reality to tarnish their vision, or, better yet, they think that their original vision was gospel. They miss the most critical point about entrepreneurship in that real entrepreneurs never stop finding new ways to create value.

Imagine now the entrepreneur whose vision is still vibrant, despite numberless revisions, and is still pitching something that they believe in and that makes me believe in them. I don’t care if they’ve changed their mind a million times, failed miserably, or if their plan has huge holes in it—I want to invest in this person. I want to invest in someone with a half-decent plan and a true belief that they can do it. I want to invest in someone who never stops being an entrepreneur in the purest sense and keeps the vision alive.

Next time you want to test an entrepreneur, ask them what keeps them up at night. If they’re beaten up by the cruel world, they’ll answer by telling you that they worry about problems. If, on the other hand, they continue to reinvent themselves and their company, they’ll answer you by telling you that they stay up at night thinking about how they’re going to capture the next big opportunity.

Dealmakers

Doing deals can be one of the most energizing events in one’s professional career. From the initial indication of interest to the final document signing, you really get a full perspective of what drives each player and how the deal is going to make things even better.

The most frustrating thing, however, is trying to do a deal with the right company through the wrong people. Anyone who has ever done a deal has experienced this, because it happens nearly every time, and if you’ve ever completed a deal, you probably initiated several others that broke down along the way.

Finding the right people at the right level in the organization and with the right motivations is always tricky. You either go through the process several times until you’re talking to the right people, or you pretend to have no understanding of the decision-making process, suggest that the person you’re currently talking to is only part of the picture, and ask to involve the right people.

What would happen if an organization chose one or a few dealmakers who had a good sense of the entire organization and what would happen? They could pull retired company veterans who know the ecosystem and make them the designated dealmakers. Then, anyone who wanted to do a deal would immediately identify this person, meet with them first to quickly vet a deal, and then involve the analysts, etc. when the deal already made strategic sense. In a nutshell, you remove the gatekeepers completely and backfill the analysis after you knew the deal made sense.

Accurate Financials

Right now I’m slogging through some messy financial data, and I’m completely frustrated by the integrity of the data. With all the advancements in software and technology, one would expect companies to maintain accurate and consistent records and projections, but that rarely seems to be the case.

Every company, big, small, new, or old, must always maintain an updated, simplified, and sufficiently transparent set of financial statements. From an investor standpoint, anything less than complete clarity in financial records and projections cast a shadow of doubt on both the business and leadership that suggest that they are not good stewards of the investment dollars.

Larry the Liquidator vs. Gordon Gecko

I just finished watching Wall Street (1987) and I’ve gotta say that Gordon Gecko (Michael Douglas) doesn’t hold a candle to Larry the Liquidator’s (Danny DeVito) shareholder speech in Other People’s Money (1991). Gordon doesn’t really tell a story other than “greed is good,” but that’s weak at best. Larry, on the other hand, uses a similar “I’m making you money” theme, but then he starts talking about buggy whips and funerals. I suppose that Norman Jewison had the advantage of watching what Oliver Stone had done four years earlier.

I’ve never been to one of these meetings before, but I’m curious to know if anyone else has given such a speech or heard on themselves. Is there really that much drama?

Trusting Your Employees

Some companies follow an absurd pattern of ratcheting down on their employees to prevent them from browsing the web, checking personal email, and shopping. They seem to think that they own their employees and their minds when they are at work. Employees keep finding ways to work around these restrictions, and employers keep plugging holes in the dam.

And then there’s another approach. This approach focuses on keeping employees happy and realizing that if your asking for their full commitment to the cause, that you’ve got to make sure that they can do those things that will keep them happy while they’re plugging away. Employees learn to decide when to answer their phone or reply to an email, and they feel respected as real people who lead real lives outside of work. Let’s face it, the more people integrate work into their personal lives via email, phones, and old fashioned homework, the more employers are going to have to allow their staff to tend to personal issues at work.

Perhaps the biggest effect of respecting the personal lives of your employee while they’re at work is that it breeds trust. You send a strong signal to your staff that I trust you to manage your time and effort, but I expect you to deliver for me when I need it.

The Option Effect

It is amazing what can happen when you go from one option to two. With one option, you are psychologically bound by the probable realm of possibilities. While you may think that the option is good, you’re probably lacking in perspective. Two options, on the other hand, give you a reference point and almost always lead to a better outcome.

The “option effect” is the name of the game when it comes to everything from deals to relationships. Before I met my wife, I always had a top three list. If one relationship fizzled, I had two more that I was cautiously cultivating and could quickly escalate if I wanted.

When I used to be in the government RFQ business, organizations almost always required at least three bids to run a process, and it was for good reason. There was always at least one foul ball, one stretch, and at least one decent bid.

Every time you decide to do something, whether it a deal or a donut, force yourself to find more than one option and you’ll improve your outcomes dramatically.

Trusting Leadership

Today I received a phone call from my friend Jay who is raising a second and final round of financing for his life science company. I met Jay about a year ago when he was competing in a business plan competition, and I was awestruck by his optimistic candor and clear vision. I invited Jay to come speak with Nittany Lion Venture Capital, for whom I was working at the time, and again, he impressed me by his honesty and forthrightness. We didn’t make the investment, but Jay maintained his professional composure throughout the process, and we parted as friends.

Today, Jay asked me if I could connect him with any other investors, and I was happy to share my rolodex with him, because he had built a relationship of trust with me.

Now I know that there are a million reasons not to invest in any given company, but the critical deal breaker in my experience is the character of management. Jay knows what he knows, and he tells you what he doesn’t. This is a dream for any investor who intends to actively engage with management.

I am emphatically optimistic about Jay and his company simply because Jay can be trusted. Among all the entrepreneurs whose character is bankrupt, Jay is a shining example of how to deal with investors.