In the January 2011 issue of Fast Company magazine, Bill Taylor said “too much entrepreneurship is a bad thing.” I read that same quote in 1999 from a leading venture capitalist, who was chastised for saying it in The Industry Standard. I agree with both of them, but think we should be clearer about what we mean.
There are too many self proclaimed entrepreneurs that are NOT entrepreneurs. How can you tell the difference? Look for two characteristics:
1. Did the entrepreneir invest his/her own money (cash…not time)?
2. Is the entrepreneur focused on generating revenue?
Real entrepreneurs treat their capital like it is their own money…because it is. They have a long term focus which requires self-sustaining cash flow, so they are focused on revenue and profits. They do not take big risks because too much is at stake – for them and their investors. They build value and create jobs. Good examples are Allegiance Capital’s clients and the well-known figures: Bill Gates, Warren Buffett, and Steve Jobs.
The “mistaken” entrepreneur follows a business model, which may be very enjoyable to execute, but has very little chance of success. The business model focuses on spending money rather than making it. The current poster child for this strategy is Facebook. When you prioritize the “cool factor” above revenue, you will usually fail.
“But Facebook is worth $60 billion” is what the mistaken entrepreneur often uses as justification for the new business model. The only way to really value a company is to sell the whole thing; no one has written a $60 billion check yet. No investor that has $60 billion will write that check because that investor will require a clear path to get the money back plus a return on the investment. A clear path means cash flow; it may or may not include “cool.”
To the investors out there…beware of “mistaken” entrepreneurs. To the real entrepreneurs…thanks. The government did not bail you out, and yet you are slowly hiring people, growing your companies, and returning this country to economic health. You’re a pleasure to work with.