What the topic of entrepreneurship means for this particular conversation
Entrepreneurs are as varied as the types of businesses one can build. These can range from local restaurants to publicly traded technology conglomerates. They can be for-profit or nonprofit ventures. They can be corporations, LLCs, or sole proprietorships. Which is to say that entrepreneurship is a broad topic, and broad topics are tough to cover in any depth. So we’ll take this opportunity to narrow it down by describing the type of entrepreneurship we’ll explore.
As a working definition, we mean entrepreneurs starting businesses that warrant venture financing. This isn’t to say that an entrepreneur or business must take venture financing. But the types of businesses these entrepreneurs want to build and the opportunities they represent warrant it. By using venture capital as the threshold, it implies a number of things about both the businesses and the entrepreneurs.
About venture-backed businesses: Venture capitalists are looking for businesses that can quickly and efficiently scale to multi-billion-dollar IPOs. It’s as simple as that. Very few of them do, of course, but the potential must be there. This means that the business is doing something new — more than likely, something no one has done before. It means the business will be disrupting a large market or industry, which is why the economic opportunity is so great. It means that it can achieve scale in a very short period of time with relatively little capital. This is why software-based companies tend to dominate venture investment — because bits and bytes scale better than atoms.
Some great examples of these businesses include Uber, GoPro, and Amazon. Uber has completely disrupted the taxi and town car industry with a new model based on smartphones — a new model, we might add, that is being applied to every vertical imaginable and what’s becoming known as the “Uberization” of a category. Amazon started by revolutionizing online book sales and ended up changing the way we buy everything. And GoPro took on Sony, JVC, Canon, and the like by cracking the code on high-quality POV video capture. The latter is one of the premier companies at the nexus of entrepreneurship and adventure sports, having initially focused on surfing and eventually raising more than $200 million in funding on its way to an IPO.
About venture-backed entrepreneurs: At the risk of sounding cliché, these people want to change the world. Keep in mind, though, that this is more of a quantitative measure than a qualitative one. These people have a vision for the future and a unique ability to make it a reality. Indeed, they are a bit crazy. Crazy like Steve Jobs, Jeff Bezos, and Elon Musk. What sets this type of entrepreneur apart from others is that their ideas are most often met with disbelief or rejection. This is because what they are proposing either doesn’t make any sense or is nearly impossible to pull off. Yet they are so passionate about the vision that the resistance to the idea just adds fuel to the fire.
This is a key distinction within the broader topic of entrepreneurship. When one proposes starting a sandwich shop or a marketing agency or a general contractor, their friends and colleagues don’t think they’re insane. On the contrary, these sound like very reasonable businesses. They serve needs and markets that already exist. They are proven to make money, and there might be a unique angle to offer a competitive edge. But unless the plan is to disrupt the sandwich-making industry and capture 15% of the global market within five years, these are not venture-backed businesses. They are, as VCs like to call them, lifestyle businesses. They are born, for the most part, from a desire to be one’s own boss, which is also perfectly reasonable. But even despite a high rate of failure, they are still low-risk endeavors compared to a venture-backed business.
The path to starting and scaling a venture-backed business is defined by a series of hurdles and gateways that become more challenging as you move through each one. Given the potential upside, the landscape is absurdly competitive. Given what must be achieved, it consumes a tremendous amount of time and energy. And despite all the talk of pivoting, there is very little room for error. Why do it? Most think it’s for the money. And while there is a significant financial motive, most know the odds of success mean you can’t focus on the money. The primary motivation is fulfilling the vision and building the company, which often amounts to achieving the impossible. These entrepreneurs do it because they can’t imagine doing anything else.
This probably sounds familiar to top-notch adventure-sports athletes. It’s because these are the Reinhold Messners, Laird Hamiltons, Eddy Merckx’s, and Shane McConkeys of entrepreneurship. They are the pioneers who bag the first descents and first ascents of the business world. Their drive is not quite rational, but they are masters of calculating and managing risk.
As such, this unique and elite breed of entrepreneurship ends up providing for a much more interesting topic of conversation.