To be serious

Aspiring entrepreneurs and the startup community in general quite naturally thrive on success stories. They provide inspiration, role models , and the promise of heady returns. But success stories can also give rise to misguided assumptions. One of the most common is around the time it can take to build a valuable enterprise.

A few companies are created and ‘flipped’ within a few years. Most aren’t. Entering the entrepreneurial arena with a short term exit horizon is likely to result in disappointment. Entrepreneurship is about developing the competence to build value and generate extraordinary returns over time. It is focused on mastering the art and science of business building from the ground up. Better to think 8 years and beyond to a liquidity event. That is not an argument against accepting a life changing amount of money 24 months in; rather it is a recognition that in most cases value is built over time. Enter the arena with the expectation of building a business.

Survive long enough and you may unlock the scaling formula for your business. That is the holy grail for entrepreneurs. Many perish on this quest. The formula is never completely unearthed. Early promise fades. The business grows year on year but not fast enough. Investors become exasperated and their interest migrates elsewhere. Their own agendas come to the fore and the business is sold with little equity value accruing to the founders. Waiting years to find out if a business can actually scale is simply too long. Life is too short. For this reason, I favour businesses that either fail quickly or where the potential to scale and the scaling formula become evident fairly early on. Of course the point to note here is that the more complex the business the more challenging it is to scale. Not all businesses can scale but as Paul Graham writes a startup is a business designed to scale. Those entrepreneurial teams that succeed deserve respect: they have acquired the know-how to navigate the startup stage, to prove their business model, and to build an organisation that can execute at scale. How rare is that?