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Entrepreneurs, don’t “stay positive”

Please reconsider your expectations

 

While many may perceive Venture Capital as a “numbers game”. It has become clear that successful investment in small and medium companies depend much more on the ability of an entrepreneur to avoid burnout and finding ways to handle psychological strain, than the ability to read a spreadsheet.

 

We are blessed to own shares in the companies of some of the top young entrepreneurs in our country and without fail, I see the same pattern repeating itself.

You find an entrepreneur with the Midas touch, everything that she touches seem to turn into gold. Some people are just talented like that… And this is exactly where the challenges arise.

These entrepreneurs are so used to being the best and to figure out difficult things much faster than others, that their capacity for emotional setbacks never fully developed. But now, in the high growth environment of entrepreneurship, the cracks start to show as they are challenged by market conditions and revenue growth of several 100 percentage points per year.

 

My message to these entrepreneurs:

 

1. Don’t “stay positive”

To stay positive does not mean that we should ignore the realities of the challenges in front of us. Jim Collins calls this the Stockdale effect in his best seller Good to Great.

“This is a very important lesson. You must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they might be.” – Admiral Jim Stockdale

We must therefore understand that there is a significant difference between:

  • Staying positive about the fact that you WILL become successful in the end;

and

  • Ignoring the realities of your current situation in an attempt to stay positive.

Always be ready to confront the brutal truth of your current situation, yet at the same time, never give up hope.

 

2. The fine line between “staying positive” and mental laziness

An entrepreneur must be willing to cross the boundaries of her comfort zone. Staying in your comfort zone allows you to lie to yourself and maintain the view that everything is going to be good someday, somehow.

This mode of thinking is often erroneously labelled as optimism, but in fact, it is a form mental laziness. It comes from a fear of the challenges you need to face today in order to achieve your ultimate goals in life in the future.

The most dangerous thing you can do is to do nothing and wait and see. Take stock of the actions that you need to take today in order to get closer to your goals tomorrow – and just do it.

 

3. Expectations vs reality

Entrepreneurs seem to be heavily influenced by what they read in the news, but I am going to let you in on a little secret about the industry today…

There are various successful tech entrepreneurs who run companies that are actually profitable. These guys and girls are preparing for listing or raising funds “under the radar” from current shareholders and networks.

When you don’t advertise the fact that you raised capital, you’re not in the news, because the news only covers funding and exit activity that they are aware of.

They also don’t need to exit as they are not subject to the time constraints of VC funds. They keep quiet because they don’t want other people to copy them.

These are the companies that you should actually look up to and network with, not the “fly by night” wantrepreneurs who fight for the limelight all the time.

Due to the fact that so many entrepreneurs measure their success by the metrics of the media, they develop significant emotional strain. I am no artist, but this graph gives a depiction of how I see the emotional burden of the “fake it till you make it” crowd.

 

 

Very few people are able to fake it for more than 18 months before the cracks start to show…

 

 

4. People are inherently irrational

Once I accepted that people are inherently irrational, I became a much happier person.

“People don’t act in accordance with reality, but with their perception of reality.”

More than 90% of people that you do business with will either disappoint or frustrate you. But… you must understand the reason for this. All of us tend to look at the world through our own lenses due to the frames of reference that we developed over time.

Some of us want to win at all costs, while others want to create short term cashflow. On the other side of the spectrum we find people who don’t care about “winning” and may prioritize long term value over short term cash.

None of these views are wrong, but they are certainly in conflict when certain strategic decisions are to be taken.

It is therefore important to be cognizant of these differences and to prepare for certain objections while trying to understand the other party, rather than to get frustrated and kill a good business due to your unwillingness to communicate effectively.

In summary – as entrepreneurs we must always expect setback while keeping the ultimate goal in mind. Today, try let go of that short-term win in order to build towards the ultimate prize.

 

By Daniel Strauss – Director at Digital HQ