“You are the average of the 5 people you spend the most time with” — Jim Rohn
Are entrepreneurs born, or are they made? A recent Tech Crunch article argues that entrepreneurs can be made based on a $50M research project conducted by the Kauffman Foundation.
“The key is to provide education at “teachable moments” — when the entrepreneur is thinking about starting a venture or ready to scale it. Highly motivated individuals with “scalable ideas” can be recruited to be entrepreneurs and to be made successful, by surrounding them with a network of other experienced entrepreneurs; sources of money; and mentors. It is probably education, exposure to entrepreneurship, and networks that led these people to pursue the entrepreneurial path.”
This reminds me of the entrepreneurial story of Blake Mycoskie, who is the Founder of Tom Shoes. He started his entrepreneurial career at 19 when he started a laundry pick-up business in college. From there, he started an outdoor advertising company, television network, and technology company that provided drivers’ education for teenagers. These were successes and failures before he started Toms Shoes. There are two things to note with Blake. 1) He started his entrepreneurial career at 19 (he wasn’t born into an family of entrepreneurs) and 2) all of his companies were stepping stones to Toms Shoes (he failed and learned a lot of times before he was finally successful).
Another great story is the one behind the Paypal Mafia. What’s interesting about the Paypal Founding Team isn’t what they did at Paypal, it’s what they did after they sold the company to Ebay. They’ve launched everything from Youtube to LinkedIn to Kiva to launching rockets into space. How insane is that? And why?
“You never think it could happen to you,” says Hurley. “But seeing Peter and Max and the guys come up with ideas and seeing how to make things work gave me a lot of insight. You may not have a business degree, but you see how to put the process into effect. The experience helped me realize the payoff of being involved in a startup.”
This story is repeated over and over again. There’s the Google Mafia (another article), 351 Massachusetts Mafia in Boston, and our very own About.com Mafia in New York.
So, one could argue that entrepreneurs are not born, but maybe made over time. Maybe it’s nurture, and not nature? And if it’s nurture, is there a way to structure a fund around the concept of “smart money”? Recently, there have been a lot of great funds that have started in the NYC startup ecosystem including Founder Collective and Lerer Media Ventures, which offers “smart money” to entrepreneurs (investment, experience, knowledge, contacts, etc) as well as financial investment.
Is there a way to create a fund that doesn’t invest any funds? Is there a way to focus on the entrepreneur while traditional funds focus on the company? Can a new fund invest knowledge, experience, networks, and ideas to making entrepreneurs better?
As ideas become cheaper and easier to implement in the tech space, entrepreneurs don’t need millions of dollars to get something out the door. Yes, they’ll still need money to scale and grow when they gain traction and success, but what about those entrepreneurs at that “teachable moment” when they just need some guidance?
Here’s how a fund that doesn’t invest funds could work:
1) It would consist of a “class” of entrepreneurs (around 3-4) and mentors (around 3-4).
2) The mentors would all be successful entrepreneurs that have grown and sold their companies ($50M+). The entrepreneurs would be the next up-and-coming class that will probably grow and sell their companies for $50M+. ($50M is some arbitrary number I picked. It could be any measure of success.)
3) The mentors would act as overall advisers for all the entrepreneurs (taking a minimal equity stake), and the entrepreneurs would have a peer-to-peer mentoring network with each other (with a cross-equity option pool for the startups). The mentors can offer advice and knowledge on everything from hiring to personal life/work balance to work cultures. The entrepreneurs would also have access to each other.
4) The overall fund would take a small percentage of equity from the startups.
So, to paint a even more realistic picture. Here’s an example of how one class would look like. The mentors could be Caterina Fake (Hunch & Flickr), Scott Kurnit (About), and Scott Heiferman (Meetup) in NYC. The entrepreneurs could be Naveen Selvadurai (Foursquare), Andrew Kortina (Venmo), and Justin Shaffer (Hot Potato).
A very strong thing to note is that this fund would be focused on “nurturing” the entrepreneur versus the actual company. The problems with the actual company would still go to the angel investors, board, and VC’s that invested money into the company. The problems s/he faces with being an entrepreneur would be directed towards this fund (mentors and peer entrepreneurs), with the equity coming out of the personal founder stock.
What do you guys think? Would you take investment from this new fund?
Even more importantly, “if you are the average of the 5 people you spend the most time with,” who are the 5 people you are surrounding yourself with today?
View Comments so far ↓
1 Taylor Davidson // Mar 4, 2010 at 2:55 pm
Love the thinking around codifying mentoring and advising, providing a formal structure that creates a mix of direct and indirect benefits to mentors and mentees.
A formal structure would make the exchange and time much more valuable to both the mentor and the mentee, and if there was such a structure in place we'd find people much more interested and invested in providing real advice. Incentives change behavior.
What do you think the biggest roadblock is in getting something like this started?
(and the “you are the average of the 5 people you spend the most time with” made me think, before I even dug into the post
2 Michael Karnjanaprakorn // Mar 4, 2010 at 3:01 pm
I think the biggest roadblock is incentivizing the mentors and entrepreneurs to participate and do it.
To solve this, I think the mentors should put up a small amount of money to pay for the operating costs of the fund, in exchange for equity in the 3-4 startups.
For the entrepreneurs, I think the attraction of mentors and peer entrepreneurs would work as well.
I'm thinking this is like a Techstars but for more serious entrepreneurs (and not college students) that would last for the life of the company, and not just a 3-month summer program.
3 Michael Karnjanaprakorn // Mar 4, 2010 at 3:02 pm
I think the biggest roadblock is incentivizing the mentors and entrepreneurs to participate and do it.
To solve this, I think the mentors should put up a small amount of money to pay for the operating costs of the fund, in exchange for equity in the 3-4 startups.
For the entrepreneurs, I think the attraction of mentors and peer entrepreneurs would work as well.
I'm thinking this is like a Techstars but for more serious entrepreneurs (and not college students) that would last for the life of the company, and not just a 3-month summer program.
4 Taylor Davidson // Mar 4, 2010 at 3:11 pm
In a world where the cost to start a web company isn't terribly high and solid tactical advice, relationships and networks are more important than money, this could work
5 Michael Karnjanaprakorn // Mar 4, 2010 at 3:15 pm
I've been thinking about turning All Day Buffet into this “fund”
6 Taylor Davidson // Mar 4, 2010 at 3:20 pm
Awesome.
7 Chris McCann // Mar 5, 2010 at 2:37 pm
“You are the average of the 5 people you spend the most time with” — Jim Rohn
This is so true. It's true with dieting, with exercising, in college, and yes even startups. I think the big question is can entrepreneurs be taught or is in inherent within them, and if you lean towards the former something like the mentor fund could be extremely valuable.
Thinking about it individualistically, would I be willing to give up >5% to surround myself with others who have operational experience before and willing to coach and mentor me for the lifetime of my company. Yes I would.
It's almost in a sense institutionalizing the advising process similar to institutionalizing the angel fun process like YComb, TechStars, Seedcamp, etc.
Sounds interesting but what does everyone else think? Also join the discussion on HN http://news.ycombinator.com/item?id=1167536
8 Michael Karnjanaprakorn // Mar 5, 2010 at 2:50 pm
Reminds me of this Pop!Tech talk by James Fowler — “Can your social network make you fat? Affect your mood?”
http://poptech.org/popcasts/james_fowler_power_...
I think it'll be a debate that will last as long as entrepreneurship exists. Nature or nurture? If you believe that you are the average of the 5 you spend the most time with, and you look at the different “mafia's” listed above; it points to your environment.
Totally agree that it's institutionalizing the mentor/advising process versus the angel funding process.
9 Thanh // Mar 5, 2010 at 3:07 pm
Unreasonable Institute and Startup Weekend have this philosophy – investment in education, mentorship, and capital. Grassroots efforts to incubate entrepreneurs seem to be the way to go. I would take investments from this new fund you suggest.
10 humbird77 // May 1, 2010 at 5:54 am
Hi very interesting but the owner is giving much away far too early ?
How about testing the viability of the idea free,and getting traction to offer a mentor first THEN bringing in the mentor /angel.
.
Provided the idea is scalable the other vital..management can be brought in on stock and or profit share..leaving equity for the VC ??
This is working for me ………after wasting much time and money to find out very few entrepreneurs will get funded..and then only when they. understand the criteria of VC and customise their courtship of investors…It's time for a full disclosure of the immense waste of tme and money entrepreneurs pay for business plans and advice which is never going to advance their project..in most cases because its far too early to engage…
There is so much invested interest in the entrepreneur NOT knowing…That's why your comment to invent a better startup scenario is very welcome…
……
NOW..how about a report giving information on a much better deal for the student entrepreneur ? There is ample data for this and free systems being tested ……
11 YouTube Inventor // Jun 24, 2010 at 9:36 pm
http://www.nopersoncommittee.org
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