Thursday, March 20, 2008

Entrepreneur vs. Wild

In my own experience and based on some of the entrepreneurs I have talked to over the years, I think there is a useful and simple way of defining an entrepreneur's risk profile. That is, a simple way of explaining how an entrepreneur evaluates the opportunities available to him versus the utilization of available resources associated with this activity. I break it down simply into three types of risk profiles for entrepreneurs:
  1. Lifestyle - optimized for what makes you comfortable, or happy
  2. Investor - optimized for the greatest return
  3. Survival - optimized for sustainability
Each of these profiles provides a distinct context both for how opportunities are evaluated and how resources are managed. Each profile makes different fundamental assumptions about how incremental investment choices are made. In this simple framework, the risk profile seems to change from time to time based on the goals of the entrepreneur, the team or the venture as a whole.

Exploring this is a longer conversation, but the point I want to explore here is this: being in survival mode, and considering survival as your primary risk profile during the Valley of Death is absolutely critical to building a longterm business. Unlike starting a franchise, or targeting a quick exit, or building a lifestyle business, bootstrapping is about building a longterm, sustainable organization.

So, what does that really look like?

One analogy I really like is Bear Grylls of Discover Channel's Man vs. Wild. Bear is an experienced adventurer who has climbed Mount Everest, hiked through Antarctica, served in Britain's special forces, and a number of other experiences that most of us would consider insane because we value our lives. On his television show, Man vs Wild, he is dropped off in various dangerous parts of the wilderness. He must endure the conditions, eat whatever crawls in front of him that may provide nutrients, find water in the strangest of environments, and build shelter in places that allow him to survive the night.

Bear demonstrates quintessential survival mode - he knows what might endanger him in his environment, he knows what not to do to keep from killing himself, and he knows what opportunities to engage in and those which he should pass on. You could put Bear anyplace on earth, and know that he could use his survival skills to safely find his way home (if anyone could).

Think about it, Bear can survive under any conditions because he has spent his career training himself to do so. He has mastered sustainability.

The ability to sustain should be the output of the Valley of Death in the bootstrap process.

Bootstrapping is about mastering sustainability in your venture. It's about using absolutely everything you have at your disposal and learning how to survive - to know the limits of what you and your venture are capable of doing without killing yourself. And I do mean the limits.

There was an episode of Man vs. Wild where Bear turned to the camera and explained how it was his experience in pushing his own abilities to the limit that really gave him his sense of identity. At first I thought this was kind of corny, but then when I thought about it, this is exactly what the Valley of Death phase feels like for the entrepreneur. Think about it, what better way is there to truly know all that your venture is capable of until you have tested the limits in every way imaginable. Bear knows how much water he needs, what he can eat, how far he can jump, what problems he is capable of solving (usually), how cold his body can get, etc.

The Valley of Death is about pushing your venture to the limits, teetering on the edge of trying to kill yourself, all the while you are effectively eating creepy insects and drinking your own urine in order to make it to the next level.

The output gets coded into your venture DNA - it's a protocol for being sustainable in an attempt to leverage your greatest assets. It's an underlying way of making opportunity decisions that follows your venture so that when you switch gears to becoming an investor you don't kill yourself in the process.

Ok, so why is this important?

#1 - Focus. Don't worry about being happy, don't worry about your ROI, focus only on long-term survival and forming a sense of identity.

Struggling in the VoD? Perfect, just don't die and you win.

#2 - Sustainable Growth. Having the survival DNA present within your venture will allow you to seize on new opportunities so that you can maximize your own investment without shooting yourself in the foot.

#3 - The limits of your capability. Experience in the face of your venture's limit is the only way to define your true self-identity.

We're talking about sustainable finance policies, sustainable hiring practices, sustainable vendor relationships, sustainable product development. Once you really figure out how the parts of your company can be sustainable, you can start to put repetitive measurement and control systems in place and continue to focus on bigger and better things.

I have found that until we put processes in place that allowed my business to deliver value in a consistent and sustainable fashion, only then could I switch mindsets with regards to our risk profile. Only then could I really begin to think in an investment mindset - and that's what the growth stage is all about.

Post originally created for the Bootstrap 101 panel at SXSW interactive on March 10, 2008.

Jonathan McCoy
is a the founder of semantic web startup, Perception Labs.


Denny K Miu said...

Thanks for an interesting article on entrepreneurship. I also believe in bootstrapping and I wrote up my own experience to share in my on-line book.

Aruni said...

Interesting article. It is about survival and many days look bleak. We live for the short bursts of exhiliration and then put our heads down and work for the next in those early VoD days.

I think in the early days it's also important to figure out your timeline as to how long you will keep at it so you don't end up accidentally killing yourself!