JumpStart: IdeaExchange Blog

Recently, Malcolm Gladwell wrote an article called “The Sure Thing” in The New Yorker which shares the “entrepreneurial stories” of individuals such as media mogul Ted Turner and hedge-fund manager John Paulson.

I found this article fascinating because it speaks to something that I believe most entrepreneurs do not truly understand. And that is in order to realize very significant success in pursuing an entrepreneurial venture, the best entrepreneurs have a deep understanding as to why their products or services are going to be successful against the competition — and in many cases they understand this before they have even created the product.

Most entrepreneurs fall in love with their products or services. This article speaks to how both Turner and Paulson became experts regarding the industries their companies were operated in and how some of the “fundamental truths” in these industries were 100% wrong. These entrepreneurs, with deep insight and understanding, did the unthinkable by thoroughly understanding a few fundamental truths regarding their industries that others did not see or ignored.

Gladwell’s article is based on a new book called “From Predators to Icons,” written by French scholars Michel Villette and Chatherine Vuillermot who set out in the book to uncover what successful entrepreneurs have in common. This book shares that truly successful business leaders are anything but a risk-takers. But rather predators who seek to incur the least risk possible while hunting.

Every startup entrepreneur should read this article to help them to pause and consider some of the fundamental truths they are operating under as they pursue their entrepreneurial dreams. In most cases, there is likely going to be some additional homework they should do to increase their likelihood for sucess and reduce the risk of their new venture.

Ray Leach is CEO of JumpStart and brings his energy and leadership experiences from founding five high growth entrepreneurial and intrapreneurial endeavors in the last 20 years. Ray is a Sloan Fellow and earned an MBA from the MIT Sloan School of Management. He also earned a BA in Finance from the University of Akron.

I’d never heard of Marc Canter until yesterday, when I read that he’s moving to Northeast Ohio to help us become a hub for multi-media companies. According to his blog, he’s already connected to a bunch of influential Northeast Ohioans, including some of my colleagues here at JumpStart. His idea is big, bold and audacious — just what we need more of here in NEO - but will not be accomplished overnight nor by just wishing it so. It will take a city of people with the same vision and motivation all pulling in the same direction, so I hope he has the stick-to-itiveness to deal with the day-to-day blocking and tackling that it takes to change a culture.

While only a small part of the change trying to happen in NEO, JumpStart, since its founding in 2004, has been about trying to change a culture, primarily as it relates to the merits of a high growth business model funded by venture capital. Northeast Ohio has not generally been viewed by venture capitalists as a place to find high growth companies. Solid, slower growth manufacturing companies, yes, but high growth, high tech, get-in-early-and-sell-in-five-years companies, no. And, for most of the companies that are created here, the entrepreneurs who run them seem to be averse to venture investors who are viewed more as “vultures” rather than helpers.

Part of what JumpStart has been attempting to do over the past five years is help our clients understand that while very good things come from building a high growth company (personal wealth creation, jobs) these type of businesses can rarely get where they need to be, as fast as they need to be, without an infusion of capital from someone else. And, typically, this type of risk capital is only available from venture investors. So, while we’re often accused of “pushing” our companies toward raising venture capital, we’re really just focused on encouraging our entrepreneurs to pursue high growth business models that lead them to a logical exit (sale of company, IPO or recap). In so doing, we find ourselves trying to change a culture that, historically, has tended to view venture capitalists as the bad guys. The bottom line for us is this: if growth can occur without the use of someone else’s money, that’s great…it’s just that it’s more the exception than the rule.

But, don’t just take it from me. There are others out there reciting the same sonnet. There are a number of good articles out there on when to take VC money including: 5 Milestones to Reach Before Raising Venture Capital, and Should I Take Venture Capital Money?

Lynn-Ann Gries is the Chief Investment Officer of JumpStart Ventures. She previously worked in the investment banking departments at both McDonald Investments and Smith Barney (now part of Citigroup), and in the sales and trading area at Morgan Stanley. She received her MBA from New York University’s Stern School of Business and her BA in Economics from Smith College. She currently serves on the board of the Fund for the Future of Shaker Heights, the Great Lakes Science Center and Summer on the Cuyahoga (SOTC).

We often turn entrepreneurs into heroes — toiling day and night through seemingly insurmountable barriers in order to take a passion, an idea, and a dream to market. And that’s OK, though truth be told I have always believed that in a thriving entrepreneurial economy, entrepreneurs should be seen as commonplace capitalists like everyone else. I mean, I don’t want them to be treated as rare heroes, because that means we don’t have enough of them. I want them to be regular Joes and Joannes who wanna make a ton of money.

But that’s not actually what I’m here to blog about. I’m here to blog about the husbands, wives, and partners of entrepreneurs. Because they…well, they are the heroes, if you ask me. They often are the ones who adjust their and their family’s lives to the fact that Mommy or Daddy Entrepreneur doesn’t yet have a market salary and so everyone’s eating hotdogs again for dinner tonight.

“Hey kids, it’s hotdogs every night for the next three months,
while Mommy/Daddy Entrepreneur pursues
her/his to-date unlucrative dream.”

“Hey kids, no vacation this year because Mommy/Daddy Entrepreneur
had to cut her/his salary in order to make payroll.”

“Hey kids, Mommy/Daddy Entrepreneur is not home
for (hotdog casserole) dinner again because
the new widget Mommy/Daddy bet her/his career on isn’t working
(and by the way we don’t know if it’ll ever work).”

In addition, these unsung heroes (spouses) might work nights and weekends, or work two jobs, in order to pay for the entrepreneur’s desire to pursue their dream and passion. They often defer their own personal dreams so that their spouse can pursue her/his dream. They adapt over time, simply weaving their spouse’s entrepreneurial dream into their own future; they learn to treat the dream as their own despite the fact that they have little control over the outcome. They often do all of this with joy, grace, humor and beauty, and sometimes, to be sure, with frustration and even a sense of despair. While I think many spouses make sacrifices for their husband’s or wife’s career, I think with entrepreneurs it’s even greater: the dream all encompassing, the uncertainty overwhelming, the pay less, and the risk higher.

So, consider this blog my homage to these spouses of entrepreneurs. They are not only the most common and unsung angel investors out there, but — at the risk of being simplistically melodramatic — oftentimes they are a type of hero. 

I think a journalist or writer ought to do a series that celebrates the spouses (or partners) of Northeast Ohio entrepreneurs.

What do you think?

Becca Braun is President of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.

One of the key attributes of many startups focused on an online offering is that you really can make it a long, long way towards your actual customer offering on very little money. This presumes you can either do the technical work yourself or have a close, understanding friend to help out. The other alternative is to get outside help (an individual contractor or firm) but this costs real $$ unless you can craft a way to do it in exchange for equity, presuming you have your company, cap tables thinking and documents far enough along to be able to do this formally. But that’s for a different post! My post today deals with the timing of seeking investment when you are developing this kind of startup.

So, you’ve been able to get your idea down on paper and have at least an outline of a project plan to work against. And, you’ve found that very understanding friend to help at night and during the weekend. Next stop — quit your job? Write a business plan? Fundraising? You’re excited enough about the idea, as are your friends and family — at least enough to convince you to “go for it”. Can that excitement and some mock-ups in PowerPoint get you in front of investors?

Maybe. But that would be a mistake, in my opinion. Given the stage the business is in (really still at the concept stage), most savvy investors outside of friends and family will see a lot of risk still inherent in your deal. My advice would be to keep your day job and get the product underway — as far along as you can while still garnering an income. By this I mean get your web offering developed and in front of real customers so you can both test its appeal as well as test your business model. Google analytics provides a great facility to better understand what visitors are doing as they come to your site. As you gain knowledge from this data and elsewhere (through things like focus groups), you will need to make iterations to your code and site and do it quickly. If you have the bandwidth from a development standpoint, you should be updating your site at least weekly.

These iterations should allow you to connect with your audience in such a way that you can either charge them, charge advertisers, or both in order to begin to see some revenue. If you’ve gained enough traffic to do either, then you may be at a point to be able to secure funding. As I stated earlier, since investors will want as little risk as possible, showing an increase in traffic and your vital metrics will give them hope. One thing that has drastically changed recently, for the negative, are advertising based models. Since the economics of these are such that HUGE traffic is needed to show viability, sites that count on advertising as their only source of revenue will take longer to gestate. I don’t say this to discourage anyone — just to get the point across that it may take more time for these kinds of sites to be ready for an investor to see the growth curve they want in order to be comfortable.

If you can stay lean while you iterate and find that growth curve (it took YouTube a while, after all, before they found their “hockey stick” of growth trajectory), you can make it in the long run. Any time you have an audience that is large, growing and enthusiastic about your idea, advertisers will come around eventually, as will revenue. Twitter is another great example of this, i.e. no real revenue yet but they still manage to garner great support from investors as they work out their revenue model.

It’s all about the product offering — make it compelling, prove it with metrics and with even a small amount of revenue that proves the model, you should be able to find an investor attracted to your “near-proven” idea. These basic statistics will help take a lot of risk out of the deal for them.

John Dearborn is the Chief Development Officer of JumpStart and brings experience as an entrepreneur, founder and CEO at companies across the US and Europe over the last 25 years to the pursuit of economic transformation in Northeast Ohio.