Highly risk tolerant and constantly fixated on doing things better, entrepreneurs tend not to be found running companies.
That’s not remotely a knock against entrepreneurs. Operating a company is a management skillset, it’s operational, it’s project based, it’s plan and execute…. and these are skillsets that, while valuable to a founder, are not typically consistent with Lean, Agile, Pivot, and other notions prevalent in a startup.
As a founder, as the entrepreneur, the most difficult transition you’ll make in your professional career is from early venture to operating company. Keep in mind the clearest distinction and definition of a startup is, I think, that which Steve Blank posited, “A startup is an organization formed to search for a repeatable and scalable business model.”
Businesses and Companies are distinct from Startups
What are the reasons why some successful entrepreneurs have had difficulty in managing their companies beyond the start up stage?
There is a VERY simple explanation for this but it’s one that most people don’t like to hear because we all think we’re ideal to run our ventures forever.
Startups are NOT “new businesses”
Startups are temporary ventures in search of a business model.
As such, being in search of a model (because one doesn’t already exist), Startups can’t be run like “businesses” and rarely (if ever) become and remain businesses; in the sense of “small business” vs. “company”
With me? It’s a tough notion to wrap your head around but once you do, this struggle and the REASON for it becomes immediately clear.
A Company is a business entity owned by many people, shareholders. It isn’t owned by the founder, a business owner, nor partners; it’s owned by many.
A Business (or more accurately as I’m trying to get the idea across, a Small Business), is not that. A Small Business IS usually owned by few; maybe just the owner or partners.
Now obviously, these words get mixed up and misused. They mean different things. Try to focus not on the words I’m using but rather the intention and meaning I’m trying to get across.
At least we can agree, a Company is different from a Business, yes?
Starting a Business, odds are exceptionally HIGH that all you really need to do is what other like-businesses are doing.
Startups tend to become Companies because ….
Startups are a massive amount of risk, likely to fail. In order to help them NOT fail, they have to get lots of people involved and VALUED in ways beyond just making money. Because in the early days, they aren’t making money! That’s what Startup means.
A startup is no longer a startup when the model is figured out and working. At that point, it’s a company (usually; well rather, in fact, always as far as I can imagine).
Why are some entrepreneurs capable of evolving into companies?
I can almost always answer it with another question… Why aren’t Companies terribly innovative and disruptive?
Entrepreneurs are highly risk tolerant and constantly fixated on doing things better; fixing things and disrupting things that work reasonably well in order to make them work far better.
Those are risks. Companies can’t afford such risks and disruptions. Companies often just serve their customers with what they have, their subpar solutions, because they’re good enough and because they’re what customers expect.
Regardless of WHY, the fact is, Companies tend not to be as innovative and entrepreneurial as startups for the simple fact that Companies are no longer startups.
Companies are run by people who excel in management, operations, service/support, and process. These are not the characteristics of Startups. These are not where Entrepreneurs thrive.
MOST entrepreneurs have difficulty managing companies beyond the startup stage because companies are run by executives, not entrepreneurs. Entrepreneurs tend to leave companies to start companies so that they can work in such environments where their skillsets and personalities as entrepreneurs, thrive.
What should most startups do as the transition to company? Appreciate the fact that most of that early team probably needs to transition to a team appropriate to the next stage of what that organization will be.