Success as an entrepreneur requires an extremely rare blend of enormous self-confidence and an abiding willingness to be shown wrong and to self-correct.
The transcendental conditions of success as an entrepreneur occur at the intersection of objective real world challenges and the subjective traits of the entrepreneur and CEO.
The objective risks relate to the business case of the company and include such things as technology risk, market risk, and competition. These are all subject to discovery in a thorough diligence process. Both these systemic and idiosyncratic risks of a start up are typically well identified –though perhaps poorly navigated –by early stage investors. Less discussed however, and what I want to concentrate on here, are the subjective risks, those peculiar to the entrepreneur himself.
Most experienced venture investors will agree it is a far, far better thing to invest in a second rate company with a first string CEO than to fund an A rated company with a B player CEO. This statement, which is practically a truism in the venture world, radically contradicts the idea that sufficient diligence of a company’s various objective risks suffices in early stage investing. There must additionally be an understanding of the strengths and weaknesses of the CEO and these have nothing to do with resume items.
The question clarifies as: What makes for a successful entrepreneur ? In my view, for what it’s worth, the answer lies in the mindset of the leader. The successful entrepreneur has a number of characteristics rare in and of themselves and extra-ordinarily uncommon in conjunction. These traits include i) vision, ii) confidence, iii) work ethic, iv) self-reflection, and v) a willingness to change course.
Confidence: The entrepreneur next needs the self-confidence to believe both that he or she can develop a solution to the opportunity they uniquely recognize, and to bring this solution to market when often even the customer does not yet acknowledge the need for this. Steve Jobs made us dependent on things that did not exist until he invented them.
Work Ethic: Lots of people work very hard, yours truly excepted. But what distinguishes the entrepreneur’s work ethic is the willingness to work extremely hard now for rewards which are years away, with very low visibility into the shorter term milestones which will make for success.
Self-reflection: The nature of innovation requires an obsessive focus on the problem to be solved, and the development of the solution. That is outward looking. But a great entrepreneur is also deeply reflective, looking inward to understand his or her drive, values, strengths and weaknesses. Self- reflection is very rare in our age, and extremely rare in combination with these other traits.
Willingness to Change Course: It is well-known that very successful start-ups have to “pivot” in response to market conditions. What this requires from the entrepreneur is a willingness to be wrong, to self-correct in order to change course. And that willingness itself requires an immunity to “confirmation bias”.
Confirmation bias is a behavioral tendency to filter information based on what’s favorable to our existing beliefs. With all the information that bombards us, the mind uses filters to determine which data are relevant and to assign relative weights to these data. One of the biggest screens excludes data that contradicts our deeply held convictions. But deeply held convictions are a basic requirement of the entrepreneur, supporting the confidence and sustaining the work ethic mentioned above. That willingness to change a core conviction while retaining high self-confidence and avoiding dejection or a desire to give up is an extra- ordinarily rare trait and explains why very successful entrepreneurs are so few.