New Jersey Entrepreneur

Hang around the Venture Capital community long enough, you will realize the high value the VC firms place on an experienced entrepreneur. Better business decisions are made by those with experience.   As a result, the venture capital firms have a core set of criteria in evaluating the merits of a venture, and who is heading the venture is right at the top. They particularly appreciate the entrepreneur who has experience in a prior venture. If a successful prior venture---all the better, if a failure it is very often viewed as the training ground for the current venture  that the vc may now be thinking of funding.

Sometimes an experienced entrepreneur is called a serial entrepreneur. This is an individual who consecutively launches new ventures. Often as one venture matures, the serial entrepreneur starts another venture, repeating the start up process again and again.  The start up stage of a business is the most difficult as almost 80% of new businesses fail in the first five years. The serial entrepreneur understands the startup process uniquely well and therefore is able to more efficiently and confidently move through it again and again while applying their experience along the way. That knowledge on how to start a small business is one of the key factors that the venture capital firms feel makes the difference in reaching venture success. This emphasis on the experienced entrepreneur has has given rise to the phrase betting on the jockey, not the horse.

What does Peter Sampras have to do with this? Well, if you have followed tennis over the last fifteen or so years, you will recognize that Pete Sampras was the number one male tennis player for six years in a row and at one time held the record for most Grand Slam event titles. Towards the end of his career when his quickness and reflexes were slowing just a bit, Pete continued to win top matches---often dramatically close, but Pete still came out on top.  When asked at the end of the match how he was able to win the decisive points when it was needed, while his opponent seemed to flinch, Pete explained that he often envisioned the same circumstance he had experienced in prior matches that he had won.  This experience would lead him to successfully overcoming the current challenge.

This ability to draw upon experience and resources from within gave him the extra element to win. These intuitive reactions under intense pressure brought him the success that the inexperienced player lacked. The experienced entrepreneur is likewise able to do things and respond to crises that an inexperienced one may have to feel their way through for the first time. This is the on the job training that the venture capital firms shy away from and do not want to fund. It is why they value highly the experienced entrepreneur.

This view by venture capital firms and angels is not an absolute and often is worked around. The venture capital firms encourage the founding entrepreneur who has limited experience to surround themselves with an executive team that has the experience they lack.  In some instances, the vc firm may help the entrepreneur put the team together. In some instances when the venture is stalled the vc firm may insist that a more experienced executive take over which often leads to friction between the vc and the founder.

When learning about the venture capital industry, you will hear about ventures that were successful after a series of executives were brought on board at various stages of the startup to handle the particular challenges of each of those stages. Many founding business owners do not understand this process and often resent the venture capital firms exerting their power to move them aside--even when it eventually has resulted in making the entrepreneur a lot of money...it was just not on the entrepreneur's own terms. These situations of changing leadership is not something the vc firms lightly do. They do not want to become so involved in the operations of the venture, but they will do so in the situations where they need to protect their investment.

Returning to Pete Sampras, don't underestimate the importance of having sufficient experience to draw upon to lead a venture through its various stages from startup to high growth. Successful entrepreneurs and great champions know how to channel their prior experiences and successes in the right way and at the right time that will give them the needed extra element for success.  Unlike a retirng tennis star, a founding entrepreneur can wisely stay involved by briinging on the right help when the demands of a growing company are too challenging.

Found this article interesting? Would you like to learn more about getting through the start up stage of a business?  Doing More, With Less: Bootstrapping 

About Jeanne Gray

Jeanne Gray is founder of NJEntrepreneur.com and has been an entrepreneur for most of her career. She now works with entrepreneurs in preparting them for funding and helps business owners by creating growth strategies. She may be reached at 908-917-9900 or jgray@njentrepreneur.com .  Ask about The Entrepreneurs Exchange--a peer group meeting each month moderated by Jeanne Gray.