This is part 3 of 4 in a series where I share lessons learned around starting a new business. In my previous articles, I wrote about Professional Expectations and Establishing Confidence in your work.
In mid-sized towns like Erie, there is risk aversion around launching a new business or initiative, though that has changed over the past two or three years. Smaller regions typically battle public and private sector resources shortages that make investments riskier.
Starbursts bolster the economies of wealthier regions. Starbursts are successful companies that reach a critical mass, then begin discharging money, talent, and confidence into their local economy. One example is large-scale investor exits that return sizeable amounts of cash to shareholders. Investors use returns to invest in riskier ventures, a cycle in many ways exemplified by Elon Musk. As an entrepreneur, he earned a sizeable exit from Paypal, then plowed those earnings back into Tesla and SpaceX, two ventures considered very risky by traditional risk capital.
In economies with resource scarcity, there is a higher focus placed on the quality of the deal. Investors can’t afford to lose money. They inevitably ask: is the entrepreneur capable enough to scale their business?
A tricky question to address. On the one hand, entrepreneurs need to be creative enough to identify a new, innovative opportunity. On the other, they need the business acumen to navigate the complex and competitive global economy. Business acumen might include social sophistication, understanding of complex financial transactions, and leadership qualities. These characteristics are often at odds given the nature of their skillsets.
The issue of entrepreneurs’ capability is so important that many investors will use an entrepreneur’s capability and experience as thirty percent or more of their scoring rubric when evaluating investment decisions. For an inexperienced or unlikely entrepreneur, this critical eye can seem daunting, forcing those who launch new ventures to ask, Am I good enough to be an entrepreneur?
Well, you’re probably good enough. Here’s why:
1. Entrepreneurship is a learned behavior. Entrepreneurs don’t need professional polish at the beginning. Entrepreneurs should learn professional norms and skills over time, but that comes with practice. If you can learn those characteristics, you can learn to succeed.
2. Market opportunity can be altered. Markets are human-made, which means they are flexible and change by the will of economic players. Through an entrepreneur’s will, and something called, effectual reasoning, one can build, open, forge, or bolster a market. Effectual reasoning is the ability to make decisions when the environment is highly uncertain. In today’s new economy, there is not an objectively defined limit to how many new technologies or businesses can exist. Does your business solve a problem for potential customers? Then you can build or find a market.
3. Rely on Your Community. One of the reasons why you’re likely good enough to be an entrepreneur is because you don’t need to be everything to your business. Multiple founders who share complimentary skillsets found successful companies. They receive substantial support along the way including education and training, financial support, and informal mentorship to fill knowledge gaps.
4. Failure is OK. Above all else, the reason why you’re probably good enough to be an entrepreneur is that failure is OK. All entrepreneurs fail in many ways and often daily. But, failure is the best teacher, and there is always a tomorrow.
Key Takeaway: You’re Good Enough
If you can learn, persist, and fail, you’re good enough to succeed as an entrepreneur. These are important lessons for entrepreneurs starting new ventures. Capital is important, but it is often a question of scale. Capital can help scale, but success as an entrepreneur is determined by what you’re made of, not what you own.