The anatomy of the perfect entrepreneur

Most people think the world of startups is high tech. This post will tell you it’s primitive. It will tell you startups is where sports were a hundred years ago. It will tell you how founders and investors can improve performance. In the process you will meet a perfect athlete, meet pre-modern entrepreneurs and learn when the word startup was born. In the end, you will be better at startups. Knowledge is power. Use it.  

It was the biggest event on the planet. And all eyes were fixed one person. Elmer Niklander from Finland.

Niklander was the Vitruvian Man. His body was 185 cm tall and weighing 79 kilos. It was elegant and perfectly balanced. Like a renaissance sculpture. Every coach had told him he would become a superstar. And now he was.

He bent down and grabbed the 7.260 kilograms. He took a last deep breath. Then he exploded and hurled the ball 14.15 meters. The year was 1920. And the place was the Olympic shot put final in Antwerp.

70 years later, Randy Barnes from USA throws the same ball 23.12 meters. A devastating advance of more than 60%.

The false idea of the universal athlete

Elmer Niklander grew up in the early days of competitive sport. When he was 6 years old, the first modern Olympics took place in Athens. And If you had been at the opening ceremony, you would have witnessed something strange.

You would have seen 2,626 athletes from 29 countries come marching in. The strange part: Everyone almost looked the same.

But back then it wasn’t strange. Because until recently, it was believed that sport was a thing. That being good at sport was a function of universal physical coordination. And that coordination was best achieved by a harmonious body with perfect measurements relative to each part. Like the Vitruvian Man. Today we can appreciate the logic. Obviously, it was mistaken.

The recognition of specialized athletes

At some point it was realized that sport wasn’t a thing. We learned that sport was in fact many different things. The world of sports has specific disciplines. Each discipline has distinct problems.

Shot put impose the biomechanical problem of hurling a dense ball as far as possible. Swimming imposes an entirely different problem. To propel the body though water using minimum energy.

Once the distinct problems of each discipline were understood, the idea of the perfect athletic body faded.

Shot put requires a short explosive motion. That means that the muscle to fat ratio is irrelevant. Fat is mainly a problem for endurance. Good shot putters don’t need a six pack.

Swimming techniques mainly use upper body movements. That means the legs don’t matter much. Big feat and long arms do. Michelangelo would never have sculptured Michael Phelps.

When we finally realized that sports were many different things, something counter intuitive happened. Athletes started to look less perfect. Actually a lot less. But, their performance soared!

If you had met Randy Barnes, you would never had guessed he was an athlete. Much less, that he was an Olympic gold medalist.

Instead, Randy looks like a bouncer. Partly because of his monstrous frame of 132 kilos. Partly because of what appears to be a beer gut.

But, if Randy Barnes had participated in the 1920 Olympics, Elmer Niklander wouldn’t have stood a chance.

The false idea of the universal entrepreneur

The modern tech startup was invented in Silicon Valley in the late 1950’s. However, people didn’t call them startups. That didn’t happen before 1976 when Forbes Magazine first coined the term.

The founders of the modern startup adopted a name for themselves. Or someone gave it to them. A much older term. Entrepreneurs.

Before the modern tech startup, entrepreneurs were not the people we would think of today. Entrepreneurs were businessmen. And back then, most business was trade. Buying and selling goods with a profit. It required an appetite for risk, and skills in negotiation and salesmanship. People who excelled in those things were sometimes referred to as “born entrepreneurs”. It was an ideal. The business version of the Vitruvian Man.

But when the label “entrepreneur” was given to founders of startups, something changed. What changed was the nature of the underlying business. See, startups aren’t trading companies. Trading is a business model. Startups are not. It’s not even a thing. Its many different things. Does it ring a bell? Now you know where I am going.

The problem with the universal entrepreneur

The term “startup” carries no information about what it does. Nor what its business model is. A startup can do anything from deep science, to organizing sharing of goods, to inventing a new currency. It can sell to government, business and consumers. Its products can be software, hardware or living tissue. There are basically no limits. They are all called startups. And everyone starting them are all called entrepreneurs. And herein lies the problem.

The problem is the multitude of business models. Because each business model has specific problems. Getting consumers to buy virtual goods in games is a vastly different problem than navigating corporations to sell enterprise software to executives. Or getting retailers to provide optimal shelf space is a very different from getting an army of telemarketers to perform.

When modern shot putters are so much better than Elmer Niklander, it is because the specific problem of shot put has been understood. The talent scouts know what to look for. The coaches and athletes know what to train.

Our understanding of startups is where sport was in the 1920s. We know that there are disciplines, but we don’t distinguish the specific problems of each discipline well enough. We still believe in the Vitruvian Man.

That means investors favor universal characters. Like Jack Dorsey. A man who can run both Twitter and Square. And anything else he puts his mind to. But wait, that’s what people thought of Elmer Niklander. Including Niklander himself. So he also competed in discus, hammer and javelin.

The recognition of specialized entrepreneurs

Startup fail rates are horrendous. Some people think it’s supposed to be. But it doesn’t.

Most startups don’t compete with each other. It’s not a zero sum game. In fact, most startups could become successful without it being a mathematical problem. The only ones suffering would be the incumbents.

For this reason, increasing the success rate of entrepreneurs is fairly simple. It’s mainly a function of making the entrepreneurs better. How? Well, we know this by now, don’t we?

We must shed the idea of the universal entrepreneur. We must understand the different disciplines within startups. We must understand the specific problems each type of startup face. We must know what to look for and what to train. Mark Andreesen calls it: Strength over of lack of weakness. But the key question is what strength?

If I knew, the secret to unlocking a massive improvement in success among startups would be within my power. I don’t. But I have a thesis. The thesis is there are at least 144 different sets of startup disciplines.

I am analyzing each type of startups and the specific set of critical skills needed by the founders. If founders possess those skills and train them, they become Randy Barnes. If you want to follow this work, keep an eye on my blog.

Conclusion made:

  • The idea of the universal athlete dominated early days of competitive sports
  • The idea of the universal entrepreneur still dominates the world of startups
  • When sports were broken into disciplines and athletes specialized, performance soared
  • When startups will be broken into disciplines and entrepreneurs specialize, performance will also soar

 

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Why startup founders feel lonely but aren’t alone

What I am about to tell you is a true story.

I got fired. It was the strangest thing. The company was my own.

One hour earlier I had put on my headset. Connected to the wifi in my hotel room. I had a board meeting. I reported from my business trip. I had met with a big potential client. He had even invited me to his home for dinner. I would go after the board meeting. It was a good sign. I was proud and excited. Then it happened. At the end of the agenda. Under Other.

Our chairman said: You are fired.  Budgets weren’t met. Again. He explained there would be a staff meeting later. The team would be informed. A new CEO had been found. He was there. He said Hello on the call.

The beginning of a long and lonely journey

Some years earlier I had co-founded my startup with two friends. We talked about everything.

Then one of them got another opportunity. He didn’t talk about it. He knew we wouldn’t like it. So he kept it to himself. One day I found out. I forced him to leave. We stopped talking.

But I still had my other friend. We got funding. Then roles. Then performance salary. We stopped talking about the salary part. Then about other things too. It felt awkward.

I hired people I liked. One of them was a really great guy. He could be my friend. But I was his boss. He threw parties with the other employees. I learned when they shared pictures and laughed at the office. I told them to laugh in their spare time.

My parents often called. They preferred I took a normal job. I never complained. I didn’t want them to worry. So I showed them our offices. I made sure everyone was there. Even interns. They felt better. It seemed like a real company. They stopped worrying.

I attended startup events. I met a lot of founders. We shared information. But everyone was doing great. Most conversations stopped there. I never met a founder who didn’t do great. Maybe only we struggled.

The journey ended. Alone.

One day I went on a business trip overseas. I was meeting the customer of a lifetime. The CEO of a big company. The meeting went perfect. He showed pictures of his family. He invited me to his house the same night for dinner. I accepted, knowing that I would have time for the board meeting in the meantime. I had great news.

I don’t remember the last part of the call. But I remember when Skype closed down. The hotel room was dead silent. I was desperate to talk to someone. I grabbed my phone. I stared at the screen. I had no idea who to call. Everyone seemed like the last person I wanted to tell. Then I couldn’t breathe.

My phone vibrated. It reminded me about the dinner invitation. It was in thirty minutes. I decided to go and tell the CEO.

He opened the door with a smile. His kids and wife came to greet me too. They served dinner. Since the board meeting my stomach felt like it had twisted inside. I couldn’t eat. The CEO told me that they had big plans with our software. He said he trusted in me. He toasted to a long and fruitful partnership. His wife toasted too. She said it was an honor to have me as guest. I left without telling the truth. There was no good time between the toasts.

The poker faces of founders

After becoming a mentor and investor in startups, I sometimes get phone calls late at night. When the founder has no one else to talk to. But it’s just tip of the iceberg.

The real problem is this: Startups are partly “a fake it till you make it” game. And founders play this game against everyone else.

When founders tell their family, they calm them with good news. Mothers prefer safety.

When founders hire employees they paint a glamorous picture. They can’t compete on salary.

When founders pitch investors they downplay the risks. They know investors hate risks.

When co-founders talk to each other they position for power. They know the media will only choose one darling.

The faking means that founders deal with difficulties and worries themselves. Successful bluffing requires not letting anyone know. Any poker player knows this.

But behind the “things are great”, most founders have tried this: Not knowing if they can make payroll next month. Been turned down by every investor in their area. Being so far of a milestone they have no idea how to reach it. Having taken devastating critique by investors in a board meeting. Had key clients churning. Having lost important team members to competitors. Having the product break down and not being able to identify the problem while support tickets are flying in. Expanded to new countries and not making a single sale two months in. Hired friends that don’t perform. Having been betrayed by a co-founder. Declined class reunions because there is nothing to show for yet. Lost romantic partners because they always came second.

If you are a founder, know that you are not alone. Everyone experiences this. Even those who are really successful. I hope that we can learn to be more honest about the hard things.

I will end with an old proverb. It says: If you want to go fast, go alone. If you want to go far, go together.

Conclusion made:

  • Entrepreneurship is partly “a fake it till you make it” game
  • Founders even fake it among each other
  • Founders face things they don’t share with anyone
  • Everyone would benefit if we could be more honest about the hard things

Check out Accelerace. We invest in tech startups.

Why luck matters for startups and how to be lucky

High performers will tell you luck is irrelevant. This post will do the opposite. It will tell you luck is important. It will explain how luck affects startups. It will guide you to be lucky. In the process you will experience the extinction of the dinosaurs, meet a different Netflix and learn about Swans. Luck is power. Use it.

A famous technologist and investor stepped on stage. He reflected and told stories from a long life in Silicon Valley. After spellbinding two hours, he concluded on everything he had learned. He spoke a single elegant sentence.

But what he said, left everyone in disbelief. Confusion spread. Was that it? Had they misunderstood? I couldn’t be.

The Narrative Fallacy

Imagine this famous experiment. A room with one million people. Everyone pairs up to play the game of heads and tails. Coins are flipped. Losers leave. Winners stay. Now half the people are left. New pairs are formed. And so it continues. In the end, one person is left. The winner. He has been right unbelievable 19 times in a row.

Let’s imagine we celebrate him. We give him awards. We label him genius. We study his technique. His fingers are rather long. We study his childhood. He used to play heads and tails with his brother to decide TV channels.

Let’s imagine we interview him. We ask him what makes him successful. What would he say? I suspect he would pause and think. And then he would do what most people do. He would fall victim to the Narrative Fallacy.

Good storytellers got many children

In pre-modern times survival wasn’t given. So humans strived for safety. Being safe was a matter of control. Control is understanding connections between Cause and Effect.

Humans achieved understanding of Cause and Effect through experience. Those who had eaten many berries knew which types caused stomach ache. Experienced people had high social status. They provided safety. The group made them Elders, Chiefs and Priests.

The experienced people were asked for advice. On all matters. Sometimes on things they didn’t really know. But they liked the role. It had benefits. Food and wives. The products of high social status.

So they started giving advice on everything. They made up Cause and Effect explanations. Like: Thunder is created by a hammer swinging angry god. Sickness is caused by evil deeds. Mermaids make sailors disappear.

The best storytellers had the most children. And so it happened. The ability to make up explanations spread. Today, it’s in all of us. The Narrative Fallacy.

Luck is real. Also for startups

Back to our winner of the coin toss contest. He gives the reporter what she wants. What everyone wants. The explanation for his outstanding performance. The Causes that lead to the Effect. The things he did to win. And people like the answer. It provides a recipe. We understand what caused his success. The story is created.

No need to explain the ridiculous nature of the heads and tails example. We understand that in a such experiment, someone will eventually win. We also understand that the winner was just lucky. But in the game of startups we do the same. We celebrate successful founders. We interview them. We study them. We make up stories about them. We identify Cause and Effect. But we rarely talk about luck. Its role is not well understood. In fact, it’s taboo.

The problem is this. We are afraid of luck. Afraid that attributing luck will harm us. Successful founders wouldn’t harvest social status. Authors wouldn’t sell books. Venture capitalists couldn’t raise funds. Accelerators and advisors couldn’t justify value. Like our heads and tails winner. We would never celebrate him in real life. Luck is not welcomed. But luck is undeniable real.

Every week someone wins the Lottery. Every day a child is adopted and gets a chance of a happy childhood. Most scientists believe that life and the birth of the universe are results of extraordinary coincidence. In other words: luck.

But if luck is (also) true for startups. How should we approach it?

Birds of serendipity

There is a phenomenon called a Black Swan. It’s an event that has no predecessor. It catches everyone off guard. It’s random.

Black Swans define our existence. The extinction of the dinosaurs. Birth of Jesus. The First World War. The iPhone. A Black Swan can happen today. Or tomorrow. Or next year. We don’t know. But we know it will define our future. And it will impact your startup. And your life.

The Black Swan has a cousin. The Grey Swan. It’s more frequent. But It will still surprise and impact you. Like Hip Hop, Snapchat and CrossFit. Together, these Swans are catalysts for change. And the change can be either: Good or Bad.

When Apple sent a Black Swan flying in 2007, it was bad news for many people. Namely for everyone that made Java apps. Not to mention Nokia managers.

But the iPhone was good news to others. Like a tiny startup called Unity. They had made it easy to build games for Apple devices. Two years after their founding, Apple revealed the iPhone. Then the App store. The iPhone became the world’s biggest gaming device. Unity benefitted. Today, it’s a unicorn.

How to be lucky

Luck is when a good Swan appears. But they hit randomly. And they are blind. They don’t know who they benefit. And they don’t care. Both good and bad Swans are random.

Because Swans appear randomly, the chance of getting hit is a function of time. That’s true for any random game. The more you play, the bigger the chance of winning. Our coin toss winner had to show up. Imagine Unity had folded before the launch of the iPhone. To be lucky is a matter how long you play the game.

But the risk of being unlucky is also a function of time. The longer you play, the bigger the risk of unlucky events. But there is a trick. The key to luck. And it’s simple, but hard. The hard part is the reason why we should acknowledge luck. Why it shouldn’t be taboo.

The trick is this: Don’t let the bad Swans kill you.

Not everything died in the mass extinction of the dinosaurs. Some animals and plants survived. Those that were versatile and scrappy. Like Amazon during the dot-com crash. Or Netflix ten years ago. They sent DVDs back and forth in envelopes. Internet enabled streaming was a really bad Swan. But they adapted.

If you can outlive a bad Swan you stay in the game. Richard Branson calls it protecting the downside. Fund managers call it hedging. Your mother calls it not putting all the eggs in one basket. They all understand that losing everything means game over. Your chances to be lucky goes to zero. But if you survive. Your chance of luck returns to random. You can be lucky.

The ultimate guide to luck

Here it comes. The ultimate guide to luck:

Guide for startups: Expose yourself to luck by staying on the market for as long as possible. Keep lean and protect your runway. Pivot if unlucky events occur.

Guide for people: Expose yourself to luck by staying alive as long as possible. Go out every day and interact with the world. Get up every time you fall.

Tomorrow a good Swan may come

Conclusion made:

  • Humans hate coincidence because it introduces uncertainty
  • Humans make up stories to downplay coincidence
  • Luck is taboo in entrepreneurship, but it’s very real
  • Luck comes as good Swans
  • The key to luck is to stay in the game and get up when you fall