STEVE JACKOWSKI

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#Startup - Can YOU Swing for the Fences?

2/6/2015

1 Comment

 
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Last night I had dinner with an entrepreneur who presented me with the five-year plan for his growing business.  It's a solid plan that builds on his current business, expanding slowly for two years, then growing more rapidly.  I thought it was brilliant because the entire growth path, which might even get him into the IPO league, is self-funded.  He has contingencies for potential future problems and possible missed goals, and from what I can see, it's unlikely that he won't see the success he has laid out so carefully. 

But then he told me about his special project. 

It's true, most of us have them.  After all, we're entrepreneurs.  We're idea people.  We can't help it.  

Unfortunately, we have learned the hard way that these special projects can kill us.  They distract us from the focus we need to be successful.  And as my friend went into more and more detail about the technology, the initial trials, and the size of the market for the product that so intrigued him, I couldn't help but fear for the future of his main business. 

At the same time, I must admit that I, too, was fascinated by the opportunities in his special project.   

He asked me if I thought he could raise venture capital for it.  And of course, I had to ask the question: "Are you prepared to give up your main business to pursue this opportunity?"

With his negative response, I told him that first, I thought this special project was a perfect bootstrap candidate, and second, that if he were to raise VC investment, in addition to giving up a substantial piece for seed/early stage funding, the VCs would demand that he focus on this single opportunity.  That he 'swing for the fences.'  That he drop his main business.

We then kicked around the idea of him hiring someone to take over his existing business while he goes for it with the new one.

In previous posts, I've suggested that 'swinging for the fences' is something you can choose to do at various times in your life/career.  If you're young with no mortgage payments, family, or major obligations, you don't have much to lose.  Or, if your kids have left home, you've got some money in the bank, and some years of experience, again, with little to lose, why not take the chance?

But in thinking about it further, I began to ask myself (and my colleague from last night) if it might be more a question of temperament.  Does he have what it takes to swing for the fences?  As I thought about it, I realized that personally, I really don't have it. 

Some part of me wants to build a sustainable business that guarantees a reliable income for me and my employees, and is pretty much assured of at least moderate success.  I don't want to put them, me, or my brilliant idea/business plan at that much risk. 

Okay.  Maybe I'll never make it really huge, but as I suggested in my post  #Startup - Go Big or Go Home? , it appears that people who build these sustainable, non-VC-backed companies usually do better financially than those who swing for the fences.  So maybe it's not really a character flaw to be a more conservative type of entrepreneur. 

Ultimately after much discussion last night, my entrepreneurial friend admitted that he was like me.  He came from a place where he didn't like a lot of risk.  Clearly, starting any business is a risk, but we want to take as little risk as possible.  We want to be assured of winning every time, even if we don't win as big. 

I concluded with my insurance at blackjack strategy.  I don't gamble much but when I do, I play blackjack.  I admit it, I count cards.  I do whatever I can to turn the odds in my favor.  If you know blackjack, you know that if the dealer has an ace up, s/he will offer you insurance.  You can 'insure' your bet by purchasing insurance which pays 2-1 if the dealer has blackjack.  Statistically, if you have blackjack, the odds of the dealer having blackjack are smaller.  So you shouldn't take insurance if you have blackjack. 

On the other hand, if the dealer actually does have blackjack, you push - a tie.  You don't lose your money, but you don't win either. 

Me, I take insurance if I have blackjack.  Why?  Well, if the dealer doesn't have blackjack, I've paid 50% of my bet for the insurance, but I win 150% for my blackjack, netting me a gain of 100% of my bet.  If the dealer does have blackjack, I push on my bet, but I win 2-1 on my insurance, netting me a gain of 100% on my bet.  In other words, I always win - always. 

In the long run, I may not win as much as I would have if more often than not I'd won 150% of my bet but tied some of the time.  I'm the kind of person that given the choice, would rather never lose and be guaranteed that I'll always win.  I'm just not a swing for the fences kind of guy.  I take insurance  when I have blackjack. 

As we wrapped up the evening, my friend admitted that he's the same.  He's now exploring hiring someone who doesn't take insurance when s/he has blackjack to head up his higher-risk venture.

Negotiating Agreement
Should Your #Startup Try #Crowdfunding?
1 Comment
Jack Trageser
2/6/2015 09:33:49 am

This sounds familiar for some reason . . . . sound advice!

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    Steve Jackowski

    Writer, extreme sports enthusiast, serial entrepreneur, technologist.

     
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