“If you can do anything else and be happy, do it.” A famous Actor’s studio guest talking to young actors.
“Interestingly, however, although in some regions self-employment is associated with higher levels of life evaluation (i.e. more happiness / satisfaction), most regions do converge in terms of showing that employing oneself and running one’s own business is generally associated with the experience of more negative emotions such as stress and worry.” (Source 11)
No. Don’t do it. You don’t have what it takes. What do you even know about starting a company? Why do you possibly think you can succeed, when so many people so much smarter than you have failed?
Are you still reading? Then maybe you are an entrepreneur.
Research on entrepreneurs shows that they tend to have a) optimism, b) innovativeness, c) risk-tolerance, d) education and e) social exposure to entrepreneurial role-models — particularly close family members, and most influentially mothers and fathers.
A significant amount of research shows that in Western democracies at least, entrepreneurs tend to earn more, on average, than similarly-skilled people pursuing traditional ‘employee’ paths, but they are also much more stressed and subject to negative emotions — at least in most ‘modern’, ‘western’ nations. (see: Source 10).
I took one business school class on entrepreneurship. My professor was a founder of several successful brew-pubs in the Washington DC area. He was also about 80 pounds overweight. I don’t remember much from that class, but I do remember that he told us that he ran marathons and was incredibly healthy prior to starting his company — but that the stress of founding had taken a huge toll on him. I do remember that he warned us to take care of ourselves. And I remember thinking that I valued my health and would never get to a place where I damaged it for a business.
Ten years later I was in the hospital.
Starting a business can also be very, very hard on friendships. I have seen 3 or 4 best friendships over the years in various start-ups end because of the strain of starting something together. A best friend, particularly a lifelong best thing is a rare and incredibly valuable gift. Starting a business together will either cement that friendship in ways that very few things in life can, or strain it potentially to the point of breaking. That risk should be considered, and you should be willing to put protections and safeguards in place, and fight for that friendship.
Next, should you drop out to start a company? There is a mythology, particularly in the US filled with stories of the famous drop-out billionaires — people like Bill Gates, Mark Zuckerberg, and Steve Jobs. People who left school early to become billionaires.
That’s all it is, a myth. Elon Musk had degrees in engineering and business from a top school and then graduate work at Stanford. Peter Thiel, one of the biggest proponents of this myth, has multiple degrees from Stanford — both undergrad and the law school. Warren Buffett got undergrad education in finance from two schools and a master’s degree studying with perhaps the most famous value investors of all-time at a time that was very, very rare.
In fact, the only facts I’ve found on this show that only 6% or so of the world’s billionaires dropped out of, or didn’t finish, college.
Earning a lot of money very early will not necessarily make you a happy or more balanced person. Dropping out is fine for some very rare cases, but is a very bad general rule — as it generally speaking closes off life options, and restricts your world-view.
All of the founders at AND 1 at least finished college at top schools, and two of us had MBA degrees at the time of founding. We were still fairly unpolished emotionally and as people, but would have never achieved what we did without our educations.
There are two competing factors here — one — staying in school longer increases your expected income if you do, in fact, become an entrepreneur — but two, it also decreases the probability you will become an entrepreneur — likely because of a few factors — a) your opportunity cost increases (i.e. you are more employable at a higher salary), b) your student debt increases, and c) you become a lot more aware of other life paths and have more social networks and access to them — so the ‘one pointed’ focus and ‘desperation/motivation’ that often drives great founders is potentially minimized.
In general, I think 99% of all people should stay in school — at least through college.
The best time to start a business in terms of your life stage is often between the ages of twenty to thirty or after you are financially secure. These are the stages where you are typically not supporting a family and can take larger financial risks. You also have much lower opportunity costs in terms of a) foregone earnings in your career and b) risks to existing career path are lowest.
The best time in terms of your energy is also in this range.
However, in many areas — your personal management (time management, emotional maturity, etc), domain-expertise and core professional skills (running meetings, getting the best from others, leading teams, having real-world negotiation skills, etc) are likely best after you have invested at least 5–10 years in an area of work. So, there is some inherent tension here.
Some of these factors may be why so many younger entrepreneurs start consumer companies. At AND 1, we were no different.
WHAT COMPANY SHOULD I START?
“If you are always trying to be normal, you will never know how amazing you can be.” Maya Angelou
“Are you engaged in work that fits your own three circles: what you are passionate about, what you are genetically encoded for, what you can get paid for?” Jim Collins — from Good to Great
I want to offer a few framing tools for anyone thinking of starting a company. These are not ‘golden rules’, just tools to help organize your thinking and evaluate ideas.
You have many ways to think about what kind of start-up you want to build. I would like to talk about a few. The first one is to think about a 2X2 quadrant — that looks on one axis at how big your ambitions are — and on the other axis at your fundamental purpose or reason for being. Nearly all traditional venture capital funding and Social Venture capital funding fills just a very small percentage, maybe 2% each of the total space within this mapping system.
When I started AND 1, my world-view was not very big. I loved basketball. I had played nearly daily for more than 10 years — reading books, watching game tapes, and attending summer camps to make myself better. In fact, from the ages of 14 to 18, I lived at summer basketball camps 10 weeks a year — and also played in AAU games.
I had met thousands of other basketball players in these travels. During this time, I had also gone to shopping malls and looked at clothes and footwear — and bought new ‘gear’ about once every week or two on average.
In short, I both loved basketball and — because of this — I was a domain expert on the 14–25 year old consumer, their attitudes and tastes and the entire product category. I had passion and I had ‘domain expertise’ (which I will substitute here for genetically encoded for), but there was no clear evidence of what exactly within this space I could be paid for.
That is why it becomes so important to start small-scale trials. There are dozens of books now on lean start-ups, MVP’s and pretotyping. I would recommend Steve Blank’s “the Start-up Owner’s Manual” or Eric Reis’s ‘the Lean Start-up’ as starting points. You can also read a lot of free materials on-line. Below, I have filled in the ‘blank canvas’ popularized by Steve Blank for AND 1.
AND 1, through the ‘Blank Canvas’ Framework
You can find more tools from him around this on-line — see, for example Strategyzer.com.
I would like to now offer a few others tools for thinking about the type of company you want to start. The first is a ‘balanced scorecard’ approach. I have created a simple example below:
This approach allows you to create and weight your top 10 or so criteria, and then create consistent scores across them all. This is a very useful tool for ranking multiple ideas. I would suggest 5–10 ranking criteria only, as it forces more focus.
When you are young or a first time founder, and/or can’t raise a lot of capital and you need to experiment fast — you need to find low cost ways to do this. This brings us to a second major mapping system for thinking about the business you can start. This is to look at another 2×2 mapping of the amount of capital required — and the number and ease of finding your customers.
In the upper right corner is the sweet spot for consumer facing technology companies with clear, simple distribution channels that don’t require a large amount of capital to execute in. In the bottom left, are companies selling in to governments, enterprises or channels where it costs a lot to acquire a customer and there are only a small number of accounts, and it costs a lot to build a working product. These are very hard quadrants to be in for anyone, but especially hard for first-time founders.
AND 1 required some capital, but very little. T-shirts are relatively inexpensive. While it may seem we would have hundreds of millions of customers, we were actually selling in to credit-worthy retail athletic stores. Most of these are ‘chains’ where there is one buyer for all the stores. This means that to achieve scale, we really only had 30 or so national and regional accounts who would matter if we were to get to scale (actually 10–20 who would drive most of our sales).
Today, AND 1 could potentially be launched as a direct-to-consumer internet brand, but at the time we launched, this channel didn’t exist. So, revisiting the ‘three circles’ from Jim Collins.
But one of the biggest questions you can ask — is what problems really matter to me? What problems are worth investing 10–20 years of your life to solve.
Whether or not your venture succeeds or fails, the problem that are you are taking on matters.
At AND 1, without realizing it, the bigger problem we were taking on was the sense of ‘human connection’ and ‘belonging’ — creating groups that inspire and connect.
Most ‘start-up’ ecosystems evolve most rapidly in areas where the ‘picks-and-shovels’ and basic tools needed to launch and innovate are cheap and available.
Most innovations ‘fail’. The larger the innovation is, and the further from conventional practices, the more likely venture failure becomes — and the larger the financial upside of success.
Yet, failure is the wrong word and venture failure is not the same as founder failure. With each ‘failure’ you are learning. When you pick a ‘broad space’ or problem, your skills and domain expertise grow at the same time you are learning how to pick good ideas, pick good go-founders, pick good business models, manage and lead teams, etc.
Along with the problem, the key decision you can make is who you want to work with. You can’t force others to share the same passions as you — so you can either start with a group of people you really want to work with and find a shared area — or find a big area and look for a team or co-founder who cares about the same big thing as you.
Be obsessed with your ‘why’, your core reason for being, not your what — not your specific product.
“Your “why” (your deep reason for being) helps you find the right co-founders, helps you find a better true idea, keeps you motivated you through the dark times, attracts amazing talent, informs strategy and product and attracts great customers.” Danae Ringelmann of Indiegogo (Source 14).
Her why was “democratizing access to capital.” AND 1’s why was creating a brand, a tribe, a movement for the millions of basketball players who love the game and find family and community on the court, but who will never play in the NBA.
“Tell me, what it is it you plan to do with your one wild and precious life.” Mary Oliver
AND 1 through the lens of the ‘five why’ exercise.
One final approach to considering your start-up is to think about Maslow’s Hierarchy of needs.
Map where you are on this, and where your company and its mission fall. What are you providing to your customers? Are you fulfilling basic physical needs or esteem needs?
The best companies will allow you as a founder to have significant ‘growth’ on those levels of the pyramid that you most want (or need) to grow at the current time.