Over the past 20+ years of working with entrepreneurs (and investors), we have worked with both do-ers and dreamers in more than 2 dozen industries.
I recently realized that baseball analogies describe the three personality types that we encounter most.
See if you recognize any entrepreneurs among them.
1) SINGLES: This group hits singles, regularly and reliably. Neither they nor their companies are flashy, but they get the work done, time after time. These companies tend to grow organically rather than with investors, often in traditional industries. These are the “Mom and Pop” businesses that grow vertically or geographically year by year.
2) SWING FOR THE FENCES The second group swings for the fences. They start companies in fast growing fields that may warrant high multiples because of scalability. IT, AI, life science are all “hot” categories. Most companies seeking investment are in this category. Some of these people do indeed hit occasional home runs, but they also generate more fouls and outs than the first group. As one point of reference, fewer than 20% of startups attract angel investment.
The people who tend to be successful at this often made home runs early and then try to repeat it. But this is not simple replication. There are so many variables. In a baseball game, the weather may change so the air is denser, or the ball field is different, or the player is under some physical or emotional strain. In business, the market may have changed, competition may have improved, or the early success for which the entrepreneur took credit was really the result of a team that is no longer working together.
The personality type that succeeds at swinging for fences is one that can weather the shifts between occasionally spectacular success and multiple failures. These are the people willing to accept “no, thanks” from scores of investors until one or two say yes. These entrepreneurs tweak their plans and businesses based on new information, seek out smart money, and surround themselves with experienced management and advisors. They keep their eye on the ball and on both their team and the competition to figure out when to steal a base and when to stay pat to win a game.
Those who are usually unsuccessful are those who have not had a home run in their history, or been recruited by the big leagues. Maybe they were good players in high school or the minor leagues and assume they have what it takes to join the majors. These entrepreneurs offer grossly inflated pre-money valuations and inadequate equity for investment, because they fail to acknowledge the risk reward calculus of a potential financier. They always underrate the competition. They may hire friends rather than people who can do the job needed. They may think, “I have worked for a big company for a long time for a salary. Now I will start my own firm to make big bucks. Surely on my own I can sell services or products to huge school districts or hospital systems or government departments.”
Another group that usually cannot hit the fence is one that did achieve business success in one industry but then pivots dramatically to another where the skill sets are very different. Not every ball player is good at playing piano! One example of this was a couple who ran a successful dry cleaning business and then sought investment to start a resort. Others jump into the new “hot” industry based on only ancillary experience there. We have encountered people who jumped on the bandwagons of cannabis, IT, educational software, financial services, life sciences, and even peony farming with limited experience other than smoking marijuana, going to school, visiting a bank or doctor, or flower arranging. Great athletes make their abilities look easy. Some people think they can jump on the field, and hit a 90 mph ball, too.
3) WHOLE NEW GAME
The third and final group does not even pick up a bat or glove. They may not even buy a ticket to someone else's game! Rather, these guys and gals want to invent a whole new game. They love talking (and talking and talking) about it, frequently describing themselves as a “thought leaders” or “visionaries.” Their concepts are always “game changers.” In all the cases we have encountered, their business ideas are very complex, requiring multiple steps, each of which must be executed perfectly for the game to even start, much less finish. They never have proof of concept to determine if people want to play or pay to watch. They do not put their own money on the line to hire players who can “hit singles” to “get on base.” Nor do they simplify or adjust their “game” in response to feedback. Is this sort of thinking a form of self sabotage? I think it may be, because in several cases, these “Visionaries” come back into our orbit years later with - you guessed it – another new “Vision.”
Over the years I have heard people wax poetic about multi-million and billion dollar international enterprises IF ONLY they had somebody else's money to start them. They want people to work for free based on enthusiasm for the dream. They are uninterested in beginning small, so of course they never launch at all. Others sketch out in great detail complicated org charts and pages of business plans about subsidiaries, partnerships, joint ventures, vertical integration. But – oops – they lack a functioning core business with which anyone can partner or integrate. In numerous cases, these “Game Changers” have not even incorporated their business, but they spend lots of time on brochures, websites, PowerPoint decks and other marketing materials.
When these dreamers attract no serious interest and no money, they invariably use phrases like they are “ahead of their time” or others “don't get it.” To them, the beauty of their vision is that it is complete and finished. They do not seem to perceive business as a process but view it like a perfect photo of a crowd cheering after a team wins the World Series.
Working with entrepreneurs is never boring. They are always interesting people. Over time, working with so many hundreds of them, we have developed an early sense of who has the talent, work ethic, and realistic business plan to be successful. But in my business, just as at the ball park, the thrill of the game is the element of surprise, like the underdog player who catches an impossible ball or the team interaction that results in a triple play.