Survival and advantage
In high-performance entrepreneurship, finding the harmony between speed and advantage can be the key to venture control and industry leadership. But how do you find this harmony to dominate an industry and lead your venture without ceding control to VCs?
94% of entrepreneurs who have achieved $1 billion in revenue did just that. Like the gazelles, they leveraged the right speed for their ventures, and like the lions, they also became dominant industry leaders. Entrepreneurs who chose speed over dominance may have ceded control to VCs. Up to about 85% of VC-funded ventures replaced the founder with a professional CEO.
Choose your path: speed or advantage?
Think about it: in an analysis of 85 billion-dollar entrepreneurs, only 6% prioritized speed, while an overwhelming 94% chose control. Should you strive for the speed of a gazelle, the authority of a lion, or find the right balance between growth and control?
Gazelle: A Quest for SpeedSome entrepreneurs believe that speed is the price of success. Speed-driven entrepreneurs accept VC as soon as it is offered to them, usually after they have proven their strategy but before they have proven their leadership skills. But this rush can come at a cost: they lose control of the venture, get replaced by a professional CEO, and get heavily diluted by the VC and the hired CEO. An analysis of 22 billion-dollar entrepreneurs shows that speed-driven entrepreneurs only retain about 7% of the wealth generated in their ventures and that the costs of early-stage VC are high (The Truth About VC by www.dileeprao.com).
Lions: Pursuing an edgeControl-oriented entrepreneurs succeeded without VCs. By avoiding or delaying VCs, these entrepreneurs maintained control of their ventures, dominated emerging industries, and were approximately 16 times more likely to create unicorns. They also kept approximately 2-7x the percentage of wealth created compared to speed-oriented entrepreneurs, and didn’t have to exit at the wrong time just to meet VC goals. Perhaps most importantly, they stayed on as leaders rather than letting someone else build the venture.
Five secrets of billion-dollar entrepreneurs that blend speed with advantage.
How do billion-dollar entrepreneurs balance speed and advantage at every stage of their business? They employ five key strategies.
#1. Stay focused to maintain control.
The top 20 VC funds, which reportedly capture roughly 97% of VC revenue, invest after Strategy Aha and before the entrepreneur’s leadership is proven. By doing so, the top 20 VCs take control, recruit new CEOs, and replace entrepreneurs. Entrepreneurs who prioritized control grew faster. By focusing on control, Bill Gates stayed as CEO. By not doing so, Steve Jobs lost control and was forced out of Apple.
#2. Act smart to beat the first movers.
Only 11% of first movers ultimately became monopolies. 89% of first movers were lost to smart first movers who analyzed the industry and found a strategy to dominate it. Monopolies-minded entrepreneurs not only value being a first mover, but also smart timing. Mark Zuckerberg was not a first mover. He was a smart first mover.
#3. Focus strategically to gain an advantage.
Instead of fixating on an idea, dominance-oriented entrepreneurs focus on analyzing markets to find a strategy that could become dominant. Sam Walton dominated by applying a big-box store strategy to small towns. Steve Jobs copied the iPod, iPad, and iPhone; he “simply” improved on the strategy. First movers often focus on competing for ideas and pitches to find angel or venture capital. Multi-billion-dollar entrepreneurs analyze markets and industries to choose a dominant strategy.
#4. Use passion and skill to beat opportunism and capital.
While students from elite schools may have an advantage in access to venture capital, most billion-dollar entrepreneurs used their passion and skill to launch a startup and dominate an industry without venture capital. Michael Dell, like 94% of billion-dollar entrepreneurs, used his passion and skill to take off and dominate the PC industry without venture capital.
5. Match speed and advantage to take off without VC.
By resisting the temptation of premature venture capital and scaling strategically, 94% of billion dollar entrepreneurs maintained control and built successful businesses without venture capital. By maintaining control, they minimized dilution. From Sam Walton and Bill Gates to Jeff Bezos and Mark Zuckerberg, powerful entrepreneurs have built successful businesses without venture capital, maintained control, and kept much of the wealth they created.
My take: Be consistent. If speed gives you an advantage, go for it. If advantage is independent of speed, go for it. Remember, VC only helps 20 out of 100,000 companies. Skill and advantage help all 100,000.
