This week, I’m happy to present a guest blog written by my friend Phil Bookman, successful tech founder in Silicon Valley turned author of mystery novels. In this blog, he shares some interesting insights on the different types of entrepreneurs, classified based on their need to control their business’s destiny and their dedication to the mission. Read on!
You have an idea. You want to turn it into a business. You are an aspiring entrepreneur.
Before you go any further, you will save yourself and others time, money and heartache by doing a little self-assessment. Because not all entrepreneurs will take the same idea and turn into a business in the same way. In other words, the idea does not drive the way the business develops nearly as much as does the way you, the aspiring entrepreneur, are wired.
This assertion may surprise many who work with entrepreneurs, those who take an analytical approach to starting a business. It is not that the analytical approach is wrong. Far from it. Rather, it should come after, not before, understanding the nature of the entrepreneur. For an investor, this informs the rule that you invest in people first, ideas second.
Entrepreneurs tend to fall into one of four categories: Jumpstarter, Bootstrapper, Hustler or Hobbyist. The drivers of the categories are the individual’s need to control the business’s destiny, and dedication to mission. This is illustrated in the Entrepreneur Quadrant.
In this context, need for control and dedication to mission are both binary attributes. Making this forced choice may be difficult, but it is essential, and often requires some serious reflection and soul searching.
NEED TO CONTROL BUSINESS’S DESTINY
This has little to do with either being a control freak or being willing to have a working partner. It has everything to do with your willingness to cede a measure of control of the destiny of your startup to financial investors. That’s what you do when you take venture funding, otherwise known as Other People’s Money (OPM). VCs can turn off the spigot. They can shut you down. They can force changes you would otherwise not be willing to make (though they might be right for the business).
If you are a “yes” in the control attribute, you behave like an owner and need to be self-funded. That may include some family and friends money, it may include some traditional loans, but it precludes VC funding. Don’t waste your time pursuing VCs, you either won’t accept their terms and conditions or will regret that you did.
If you are a “no” in the control attribute, you behave like an investor, even if you have personally invested little or no money. You will be able to align your interests with venture investors (not to say there won’t be conflicts), and the more you do, the more successful your business will be.
DEDICATION TO MISSION
This is about your commitment and willingness to stick to the mission of the business. This does not mean you cannot and will not change direction (pivot), but you do so only after a good deal of thought and rarely do it again.
A “yes” to dedication means you get incredibly focused on mission and tend to shed distractions. As you develop your business model, you stick to it and do whatever it takes to make it work, only changing the model in light of compelling evidence, and even then, infrequently. You tend to think, “That’s not us!” You view the BSO types as opportunists.
A “no” means you are on the lookout for new opportunities, and tend to chase bright, shiny objects (BSOs) that fit with your high-level business idea, even if they mean changes to how your business operates. You chafe at the restrictions of a business model and value flexibility. You tend to think, “We can do that!” You view the focus types as being rigid.
FOUR KINDS OF ENTREPRENEURS
Once you have assessed yourself on your need to control your business’s destiny and your dedication to mission, as defined above, you’ll know which of our four types of entrepreneurs you are.
Jumpstarter gives away ownership in exchange for investment and labor. Follows a disciplined business model, often backed by a business plan to attract VCs. Self-funds only until outside investors are secured. This is the classical good match between the entrepreneur and VCs.
Bootstrapper keeps ownership in the hands of self and core active partners. Follows a disciplined business model, but rarely bothers with a business plan, especially early-on. Self-funds and grows via cash flow, at least until the business model is proven and stable. When that happens and the startup phase is over, may seek late-stage venture funding. Often viewed by VCs as a lifestyle entrepreneur.
Hustler gives away ownership in exchange for investment funds and labor. Self-funds only until investors are secured. Often has a business plan, but does not have business model discipline and will change the plan or model on a moment’s notice. Constantly revises the slide deck. May attract funding because of persuasive pitching ability. Often leaves the business during or after the startup phase. Often a sales or marketing person. Often disappoints investors.
Hobbyist keeps ownership in the hands of self, though often yearns to attract funding. Has no business model, and rarely has a business plan. Does have an idea for a business, then another, and another. May not seem to understand VC’s need for ROI. Conducts experiments backed by own funds. Often an engineer/inventor/artist.
Like all models, the map is not the territory. But the Entrepreneur Quadrant can be surprisingly useful for evaluating how you or someone else will behave as an entrepreneur. It is also a way to measure fit between potential startup partners. This is a case where you do not need complimentary attributes, you need the same attributes. Opposites may attract, but misalignment is often the underlying reason partners breaks up.