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Entrepreneurs: a Shrinking World

by Miki Saxon

There may be dozens, even hundreds, of entrepreneurs working to start the next Facebook or Google, but, in fact, one part of the entrepreneurial world is shrinking, not expanding.

“VCs tend to invest in people who’ve had good exits, who have successfully had their company acquired. If you’ve had two good exits, you know the person isn’t a fluke.” –Ross Bott, CEO of Seven and former CEO of OneBox

“William Goldman famously responded to the question, How do you predict box-office success? with the answer ‘No one knows anything. That’s why Hollywood overpays for top-drawer stars.’ The exact same thing happens in the world of startups. If you’re a serial entrepreneur with at least one success behind you, you can almost always find a host of investors who will overpay for your next startup because nobody knows anything.” –Paul Kedrosky, Silicon Valley investor and commentator

(Quotes from a profile of Bill Nguyen in Fast Company)

While talent, intelligence and vision are useful, funding flows most often to the verbally skilled, as the profile on Nguyen shows.

And although there are many more entrepreneurs, the majority have far fewer ways to meet likely investors.

In order to be heard entrepreneurs need credibility, which is rarely measured in how many followers or friends they have.

Rather, as in ages past, it comes down to who you know—again, not followers, friends or even connections, but actually know.

Know as in ‘I will introduce you because I know you well enough to put my reputation on the line and tell X that you are worth his/her time.’

Incubators are hailed as a solution, but all incubators are not created equal—kind of like colleges, fraternities and sororities, some have more prestige and offer better alumni networks than others.

Again, who you know matters.

Social media is no panacea; they promote themselves as being able to evaluate “influence,” but is that influence real? Too often it’s the result of knowing how to play the I’ll-scratch-yours-if-you’ll-scratch-mine game.

Not that there’s much choice; it’s pretty much use the available tools, because it take too long to invent new ones and have them adopted.

The passage of HR2930 opens a new avenue in the form of crowd funding, which may lower the initial connecting/funding hurdle for new and unconnected entrepreneurs.

Flickr image credit: HikingArtist.com

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