Oct 9, 2020 | How (Not) to Build a Business
Some people jump businesses like gloves. Online marketing business, then coaching business, then drop-shipping online business selling RTV equipment, then some other affiliate sales, then some content platform with materials about health and how not to die to soon, then online webinars on how to become a better parent, then some recruitment tool, then… Whatever is trendy at the moment. This phenomenon is usually referred to as “serial entrepreneurship.” What it means is creating businesses one after another — and these businesses can be loosely related to each other. It looks impressive but in reality, it is just another example of how NOT to build a business.
I used to bump into those people at business meetups before the crisis. I used to look at their LinkedIn profiles and think to myself, “Man, this guy really tried everything, what a perseverance! I wish I was that ambitious…” Or “This lady is a superhuman! She built companies in ten different sectors. She must be so knowledgeable… What a great role model!” However, after spending my time among entrepreneurs for the last few years, it became obvious to me why serial entrepreneurs get it all wrong. The difference between serial entrepreneurs and successful entrepreneurs have become even clearer in the corona crisis. Namely, businesses of many people in my circles fell apart recently. And all these people happened to be serial entrepreneurs.
What Is the Wrong Assumption Behind Serial Entrepreneurship?
So, why being a serial entrepreneur is not a good predictor for success? Well, for a few reasons.
The most straightforward answer to the question is that, serial entrepreneurs believe that success is all about grabbing the opportunity: finding yourself in the right time and at the right place. No success in the previous project? Well, perhaps the topic was not trendy enough, or my product arrived at the market too late. Or perhaps, my co-founders were the wrong guys for the job. So, the next time I’ll find someone better and everything is going to be just fine. So, let’s be this heroic, unflappable serial entrepreneur who always stands up again and starts anew… and let’s jump on some other topic straight away. If you throw a shit against a wall ten times, something will stick, right? Let’s keep on trying. Well, this is not the best approach.
Three Main Reasons Why Serial Entrepreneurship Doesn’t Work
The first reason is that, the approach assumes that you don’t need to create any added value for your business; you just need to spot the opportunity, initiate the project, and motivate people around you. And then, all the rest will be done by itself, or rather, by the hands of your team mates. I noticed that serial entrepreneurs often associate their value with whom they know.
Yes, if you were active in business for the last ten years, and you’ve been attending business meetups and conferences for all this time (and failed at ten different projects so far), you will casually know a ton of people. But what’s the added value of that? It happened to me many times that I got invited for a business meeting, and the only thing that the person was talking about for the whole hour, was naming all the people they know. Or rather, all the people they ever spoke to. And probably, after our meeting they appended me to the list of contacts that they use to brag about…
The second reason why serial entrepreneurs never become truly successful is related to self-development — or a lack thereof. Namely, they not only lack expertise that would bring a new IP to their company, but they also don’t learn while doing their projects. Since every business they build has a different target group, the only knowhow that they can transfer from one project to another, are very basic business skills such as the principles on online marketing or some growing network of causal business contacts. To come up with a real innovation or to even correctly diagnose the failure of the previous project, one needs to have some depth in knowledge about the subject-matter in the first place.
All these observations bugged me for a long time. In business classes, they always tell you that failure is a success in fact, and that investors think warmer about the budding entrepreneurs who can get over failure rather than those who succeeded with their first project. Is this true though? If you don’t learn anything from your failures, but rather, jump on yet another business opportunity, what is the value of that to the investor? There is no value. There is huge difference between pivoting, namely changing the business model for your business as the market demands, and jumping the ship.
Lastly, such people don’t have any genuine passions or interests. They just want to capitalize on something. Whatever that something is. In business, authenticity is a very important actor for success. When potential stakeholders of your project talk to you — whenever it’s your potential business partners, clients, or employees — they need to have a strong feeling that you are authentic. Namely, that you have a personal mission, and that you are a real leader who is in the business for a little bit more than just money. Serial entrepreneurs master the art of making the mechanistic, generic sales pitches. Yet, they can never be as real and persuasive as people who have a mission. If you’d like to know how this works when brought to the extreme, place take a look at the Contrepreneur Bingo series at Mike Winnet’s YouTube channel.
What Is the Origin of This Phenomenon?
I feel that the Netherlands is full of business developers. Even IT meetups — where you would expect most attendees to be programmers and engineers — are full of business developers. They walk around and hustle, looking for investors or “team members” who have the actual skills. And, they try to get you onboard to implement their “million dollar idea” — in an exchange for a modest share of the cake. And, when you talk to these people, you will quickly learn that over 90% of them are these serial entrepreneurs. It’s enough to ask them a few questions to figure out that they lack any mission or expertise.
Where do all these people come from? I feel that the main reason is this illusion of abundance. The survivor bias on the media creates the impression that there are so many successful people — all these young millionaires online who seem to be just like us — that if you try for long enough, you will be successful sooner or later. No matter what. And, everyone knows someone who got lucky in their life: invested in some speculative asset and won. Or, found themselves in the right time and place, met the right people, and eventually succeeded in business without even having much expertise. But this is like hoping that you will win in a lottery! It’s not worth spending your life like this…
Is Dropping Projects Always a Sign of Contrapreneurship?
Not always, of course. Building businesses requires a certain degree of luck. Good projects often need to close their operations because of the external situation that they cannot influence. Well, the corona crisis is a good example of an extenuating circumstance. It’s not easy to figure out when is the right moment to pull the plug. As Seth Godin has wonderfully explained in his famous book “The Dip,“ quitting smartly is also the factor for success. Every business goes through this hard phase of a dip after you already invested a lot of time and effort, but before you see the exponential growth. You need to learn whether or not you should quit in that phase.
Sometimes you don’t have market-fit good enough. With time, it becomes obvious that your business will not succeed no matter how good you are. I believe that in such a situation, you should think about how to create another business using your current expertise. In this way, your business can best benefit from your prior experience. Otherwise, you will need to go back to the starting line, which means a year or a few years of working experience without any advantage for your business.
People who repeatedly jump into a completely different domain from one project to another, are either thoughtless opportunists, or they tend to put all the meaningful work on other people’s shoulders and that’s why they built no expertise to transfer between projects. And sometimes, they change disciplines so often because they are difficult personalities. They make foes so frequently that they effectively have to start in a new tribe every single time. There is a massive difference between “pivoting” and “running.” In all these cases, I feel that these are the people to avoid in business.
How to Develop a Business Properly
I have these thoughts about serial entrepreneurs also because I recently had some online chats with good examples. Namely, with people who are successfully developing their businesses after their PhD, Alican Noyan, and Lindy Ledohowski. I felt that in both these cases, the secret behind their success was that, they do exactly the opposite of what serial entrepreneurs do. Namely, they build upon the knowledge acquired over the lifetime.
Lindy is building her business, EssayJack, as a platform helping academics in building their academic publications. Lindy is an academic herself. She walked away from a tenure position as an English professor to start her own business. Thus, she was proficient both in drafting high-quality academic publications AND writing in English before she ever set a company in that direction. And since she kicked off with EssayJack, she never jumped the ship. It was rather that, she pivoted and adjusted the business model and the marketing strategy to better adapt them to her clients’ needs.
Alican is building his business, IpSumio, based on applying machine learning paradigms to problems in healthcare, engineering, and science. He is a Master’s graduate in Material Science and a PhD who developed new methods for Hewlett-Packard in his PhD program. He also built an additional expertise in machine learning on his own by taking online courses after the PhD. Then, he integrated this new expertise with what he knew before and offered new services to his contacts from the academic world. And that’s how his business started. From what I know, Alican is now exploring new venues. He divides his time between short-term projects and more exploratory, long-term projects that might potentially lead to new startups.
So, How Not to Build a Business?
I have no doubt that Lindy and Alican are going to make it. Unlike serial entrepreneurs, they integrate all they learned over a lifetime into their businesses. They keep on learning, adjusting, and growing. And if I become a private investor in the future, I will invest in such people only. On the contrary. serial entrepreneurs will be an investment I will avoid like fire.
Would you like to read more about my view at the tribe of entrepreneurs? I wrote some more about it in the blog post “What I Learned Past Few Months… About Entrepreneurship and Entrepreneurs.” By the way, biz dev is also something I do after working hours as a hobby. I highly enjoy discussing business models and brainstorming on my friends’ ideas. It’s also because I encountered many con artists in recent years. It taught me to recognize lack of expertise and vile play early on. So, if you’d like to discuss your business ideas with me, please drop me a message!
Disclaimer: My company, Welcome Solutions, participates in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. The link to the Seth Godin’s book mentioned in this article, “The Dip,” is an associate link.
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