Serial Entrepreneurs

Last year in October, I was invited as a panel speaker at an event here in Northern Virginia organized by Smart CEO. The topic was “Serial Entrepreneurs”. It was my honor to speak along with Hemant Kanakia, Partner at Columbia Capital, and Amir Hudda, CEO Apptix. There were a number of interesting questions that came up at the event. Here is a compilation of those along with my answers.

1. Introduction and my interpretation of a serial entrepreneur

A little bit about my background. I am General Manager of a software company, called ProChain. We are based here in Northern Virginia. ProChain is revolutionizing how Project Management is being conducted. We engage in a number of key verticals: Pharmaceuticals, Semi Conductor, Medical Devices, Aero Space Industry. Customers in these industries have one thing in common: Even though they are Fortune 500 companies, either market leaders or among the top leading companies in their vertical, they struggle to get more products out faster into their market. I can break that further down for you:

- Niche markets: All of them have to think about how to serve optimally smaller niche markets profitably.

- Shorter life cycles: Products have a shorter life cycle

- Virtual R&D process: They don’t manage the entire value chain any longer. A lot of the R&D work is being outsourced or conducted in cooperation with other companies.

The bottom line is: They need to deliver more with less while the innovation process itself is becoming more complex. My company is licensing software, business process and delivers services with one goal: Deliver products faster to the market while minimizing waste.

In certain industries, e.g. Pharma, it is also important to understand in an expeditious manner, that a product (a molecule) is not viable, so that they can decide sooner, whether to discontinue further efforts or to continue with the development process. We, the people at ProChain, and in particular the guys who run the show, like to think of ourselves as entrepreneurs. We certainly believe in our offering and we believe that we can take on big companies, which we do. But I also meet on a day to day basis with entrepreneurs, who do what we do, in our customer organizations. It is amazing to see the level of entrepreneurship occuring in successful large corporations today. So, what I can offer to this discussion today is an insight into the world of entrepreneurs that are actually operating in small and large organizations.

To answer the second part of your question: What is a serial entrepreneur. Well, in order for us to understand what a “serial entrepreneur” is we need to define what a entrepreneur is in the first place. In my view entrepreneurs are guided by a strong belief about a market opportunity for their product and/or service (excited by a particular vision/subject matter in which they may have expert knowledge). They are willing to work hard to follow their inspiration and are able to motivate others to follow them. They are willing to accept and to take on a considerable personal, professional and/or financial risk. So, an entrepreneur is a combination of someone who creates value with his product and/or services, works hard to pursue a market and accepts significant and often painful risks.

A serial entrepreneur is someone who should know better …

In all seriousness – in my view a serial entrepreneur has achieved on a higher level an understanding of doing business. Successful serial entrepreneurs have

- the ability to repeatably recognize a market. He might rely less on personal intuition and inspiration but on a clear analysis on the market opportunity.

- the ability to repeatably create a product or service. A serial entrepreneur is perhaps more interested in building a repeatable process than in the subject matter itself.

- the ability to repeatably motivate individuals/teams and build an entire organization to follow in his pursuit

- the ability to delegate and surround themselves with talent that complements their own.

This might be the reason why serial entrepreneurs end up in the VC world, manage a portfolio of investments of their own or end up very powerful positions in large companies.

2. What motivates a Serial Entrepreneur?

There is the reward side. Building, growing a business, and finding an exit is certainly a great thing to do. You can make a lot of money doing that. But I think you must be motivated by more than just money. You must be motivated by the process otherwise it is tough to continue to try to beat the odds. Because that’s what we do: we test our vision and strive to execute day in day out against other companies that are potentially larger, have more resources and more staying power to overcome mistakes. I think the common denominator is that you must enjoy building things. You must enjoy the process of growth and competing. And you must not mind the sacrifice.

3. How often do you want to be an entrepreneur – what motivates to you retire?

That is probably a very personal question and depends highly on the individual. In terms of retirement (early or late) here is an personal observation. I left AOL end of 2002. I was with the company for quite for some time and before that I was with Netscape. There were a number of friends who left the company at that time. Some went into different ventures and started all over and some went straight into retirement (in their early 40s).

A couple of obversations:

- Those who left and retired had initially great stories to tell

- The hobbies they had time for: becoming a pilot, playing golf

- The travel

- More time for the family

- Those stories took a turn at the 12 month mark

By that time you did those things that you always wanted to do and now what. I’d say, for a driven person, and I tend to believe that entrepreneurs have this as a characteristic, it will be tough to rest. For myself, I came to the conclusion that as long as I feel that can identify needs, build products and get people energized, I keep doing it, because I will be happy. Hopefully, it never stops.

4. What is the impact on your family? What commitment is necessary?

In my view, my family is the most important team in my life. As I said before you can’t do it alone. There are situations where you need to get things done in business: product launches, deal making, relationship building eventually selling your business. So, your family has to be understanding.

On the flip side my family is probably the most important source for inspiration and motivation. If you think “only these two years” or what ever the time is, you run the risk that is always two years from where you are. So, if you are good in business, you have to learn how to prioritize. Your family should be one of your top priorities.

5. How important is growth for a business?

It happens every day. Businesses large and small that are not growing are dying. Costs are rising, profits are shrinking. Technology is changing. Any product or service offering has an underlying life cycle. Growth tells you that your business is healthy. The lack thereof tells you an equally straight forward story. Now, there is a catch. If you are an owner and things look pretty good today it might be tough to convince yourself to beat yourself up over a profitable year with little or now growth. This can be the kiss of death. If a business is not growing something is wrong:

- Your market is dying

- Your customers are buying but not from you and/or

- You are under investing and you create unnecessary constraints for your organization

What ever it is, it is important to find out, before someone else tells you.

6. What are critical success factor implementing growth?

A. Identify your real constraint

- Does my offering stick? Market, effectiveness, Quality

- Are my processes scalable? How I go to market, implementation model, how I innovate

- Does my organization scale: people, growth

B. Exploit your constraint

- Subordinate your organization to that constraint

- Improve it with the resources you have,

- Make it work

C. Elevate your constraint

D. Start again on a higher level

7. What are the major traps/risks for entrepreneurs?

Not looking at the down side: Entrepreneur are good at opening up the white space and discovering the wealth of opportunities in a particular market. We see opportunities where others don’t. Very often we don’t have the data to back up our intuition. Nevertheless, one of the very leveraged skills of entrepreneurs is that we start to learn how to evaluate all the opportunities that present themselves. That we learn not only to determine the upside but also the downside: What is the potential impact to our finances (do we have enough resources to support an additional product line or can we enter a new geography), do we have the bench strength, do we improve our value over the long-term. Does this impact our vision for an exit strategy? What happens if this doesn’t work out? Are we betting the farm? For people who naturally have to be very optimistic, these are potentially hard things to do, but necessary to survive.

Lack of discipline to get the processes right:

- How do you build products?

- How do you go to market?

- How do you bring people on board?

- Reward the good ones and encourage the not so good ones.

8. What are the similarities and the differences of being an entrepreneur operating within a large organization vs. a small business?

Let me start of with one comment. Just because a lot of us are with smaller businesses and we claim entrepreneurial spirit, doesn’t mean that this doesn’t exist in larger companies. In my work I meet a lot of people in Fortune 500 companies who are day in day out thinking about new markets, new products, further improvements of their processes to make things better, faster and/or more convienient. I meet great entrepreneurs at these large companies all the time. Those who have done good things are also rising to the top.

Please let me take the pharmaceutical market as an example. The reason you find a lot of entrepreueurs and serial entrepreneurs in large companies is very simple. Today, it costs on average about 1 Billion dollars to get one product ready to ship. The regulatory burden, the requirement to test a molecule (toxic in animal studies and to proof efficacy and long term studies with hundreds or thousands of people in multiple countries) do not lend itself to a model where you can start with two guys in a garage and build a business pay as you go. That’s why a lot of brilliant minds have ended up in big Pharma companies in their pursuit to find the next great cure.

Like in my definition of a serial entrepreneur the top guys who have a number of those successful product launches under their belt are more interested in improving the process of managing innovation, to get products out faster and to build what they call platforms (e.g. a serious of drugs in the field of cancer treatment).

If you ask for some differences:

Building consensus

If anything serial entrepreneurship in larger organization means that they have to be able to make their case in a very analytical way. They have to be very systematic when obtaining corporate buyin. Very often certain functions don’t report directly up to them, so they have to learn how to “work the matrix”. Hardly anyone gets to follow their gut and just do it, even though they often command enourmous budgets.

Leader’s of large organizations

Depending on where they are in the food chain they had to learn how to oversee massive organizations. So, they had to become excellent people managers.

Leverage

Enourmous impact. Serial entrepreneurs in those businesses buy other companies for money that most of us would see as life time achievement. They buy the 100M-1B as a portfolio consideration.

To sum it up. Surprisingly, I see large quantities of entrepreneurial leadership and even serial entrepreneurial leadership in Fortune 500 companies. Quite frankly, I believe it is key for any business to retain those talents to ensure long-term success.
9. What are the differences in doing business here in the US compared to overseas (e.g. Europe, Asia)?

I think you find in all places in the world great brains and wonderful people. I personally have more friends who either run businesses here in the US and in Europe. I think there are probably better people on this panel to talk about Asia. First and foremost, you have to  be prepared to pay much in more taxes if you would like to be a serial entrepreneur in Europe ….

There are probably two major differences to ramp up a business here vs. Europe

- Not one market: Europe, even though we have the EU is not one market. While it is much easier to conduct business across the various countries because of the Euro and improved legislation you still have to deal with different languages, different cultures, different legislations and ways to conduct business. This is hard to learn even for Europeans. Certainly if an American Company decides to go to Euope, there are some key learnings.

- Investment culture; The second thing is that the VC culture is different over there. While this is gradually changing, the approach to ramp up businesses is more conservative. Access to venture money is not as strong there. However, for growing businesses certain countries are very very accommodating. In Ireland for instance tax breaks help to get your infrastructure up.

If I turn this around: we have created in this country a wonderful infrastructure to build businesses. There is a wonderful business culture of pursuing opportunities. For businesses, there are a variety of options to obtain funding: angel investors, VC’s, hedge funds, banks. Compared to the European market it much easier to conduct business in a huge unified market like the USA.