As a venture capital investor, one of the first things that I look for in a potential investment is the entrepreneurial qualities of the founders. Do they have the intelligence, the drive, the vision, the skills and the perseverance to take an idea or concept and develop it to the point where it will be accepted and even demanded by the market?
There are many character traits common to successful entrepreneurs that allow them to see possibilities that others can’t, that make them work harder and longer than most, and that allow them to juggle many different tasks at the same time. Many people believe that entrepreneurs are born with the innate abilities required to be successful and that it is something that cannot be learned in school.
While I believe it is possible to learn the specialized skills and get the required knowledge to invent new products and processes, it is difficult to start a new venture without the unique abilities of the born entrepreneur.
For instance, many universities develop very important and interesting new technologies that lie dormant until they are “rediscovered” by someone either within the university, or more likely from the outside who sees the commercial opportunity in the concept, and more importantly is willing and able to take the idea, dedicate 100 percent of their time and effort, and convert it into a viable product.
Once a concept has been invented and developed, and personal, seed or angel funding has been secured and a skeleton crew hired to prove the commercial viability of the venture, one can get a good idea of whether the concept will be successful. By this point the product is usually developed enough to get valuable feedback from potential customers regarding their willingness to purchase the product. This is usually the stage at which a large institutional investor, or venture capital firm, will get involved with a potential Series A funding. The institutional investor will now typically require that the young company start behaving more like an established corporation with all of the requirements expected of similar companies including such things as more detailed financial statements and controls, a formal hiring policy and programs, an organization chart, well defined allocation of time and duties, sales pipeline and budgets, and more.
Unfortunately it is usually very difficult for the typical entrepreneur to make the required transition at this stage in leading the company forward. The personality traits that made him or her a good entrepreneur are usually not the same ones found in a person who has the right leadership skills to take the company to the next step. Some academicians have examined the concept of “entrepreneurial leadership” as a crucial component of successful companies and have studied ways of teaching it in a university environment. What are the behavioral characteristics that allow someone to motivate and instill their vision in a group of followers? The challenge for a successful company is to find a leader who can instill the drive to succeed and excel among his or her employees, combined with good corporate governance, while at the same time nurturing the entrepreneurial drive and spirit of innovation that made the company a success in the first place. One of the few people who have made the transition successfully is Steve Jobs at Apple, who has been able to become an inspirational leader not just to his employees, but also to the many consumers who have made Apple such a global success. Apple’s board of directors unfortunately did not appreciate Job’s leadership skills when they replaced him with a corporate manager, only to ask him to return when it became clear a few years later that the company desperately needed his particular brand of “entrepreneurial leadership”.
Several academicians have in fact identified three traits that exemplify successful entrepreneurial leadership: proactiveness - not waiting for circumstances to define what you are able to do but rather anticipating changing currents in the market before they happen; innovativeness - the ability to recognize changing needs and develop new ideas and solve new and old problems in new ways; and prudent risk taking - the ability to take calculated risks in developing a new idea or going after a new market. There are many established companies that have tried to systematize or institutionalize one or all of these characteristics and the most successful have been able to embrace all three, usually because the CEO is himself an entrepreneurial leader. However, balance among the three is very important as there are many examples where companies have failed through an overemphasis on one of these characteristics – AIG and Enron come to mind for having tried to be too innovative and taking too many risks.
The successful CEO is someone who not only embodies all three of these characteristics, but also someone who can adapt to a changing environment and temper the autocratic and sometimes dictatorial behavior required of a leader. At the same time, a CEO needs to instill loyalty and drive among the employees who are more responsive to, and now even demand consensus building and group empowerment rather than simply being told what to do. It is fortuitous that many of the recent technology innovations, such as Facebook, Twitter, the iPad, Saleforce’s chatter, and cloud computing to name only a few, make it easier for companies to foster innovation and risk taking within the organization while at the same time instilling the discipline and accountability that is essential for long term success.