about entrepreneurs

Coaching the Entrepreneur Prof. Michael F. Melcher Ho Chi Minh City 2003 Who am I? “Creative professional” – business person and writer – executive coach and organizational consultant Had traditional professional education (Harvard and Stanford), but left traditional jobs for more entrepreneurial ventures More on me later... Everyone wants to be an entrepreneur. . . Right? Beliefs about entrepreneurship: – Entrepreneurs are INDEPENDENT – Entrepreneurs get RICH – Entrepreneurs have FUN! – Entrepreneurs are fashionable people who make glamorous international trips to places like Vietnam! In the late 1990s, everyone in America got entrepreneurial fever! Technology sector was in a boom Moreover, technology companies needed NON-technical people – business development – strategy – creatives – human resources Plus, people were getting RICH! – Netscape public offering, around 1995 But wait, there’s more! Entrepreneurship was cool. What was the alternative to working as an entrepreneur? – Working for a big company – Doing something boring – Doing something that millions of other people do every day Entrepreneurs were doing things that were new, interesting and maybe important! Being an entrepreneur was a way to satisfy the soul. Work is important -- there’s nothing else we do for 8 hours a day (or 10, or 12, or 14)…. (Studs Terkel, Working) Smart, young Americans have high expectations about work that usually are not matched by reality Being an entrepreneur allows creativity and self-expression Review: why be an entrepreneur? The main reasons – Money – Independence and freedom – Creativity and self-expression • in my view, you must be motivated by this to be successful as an entrepreneur Another important reason – Can’t hold a normal job! • Many successful entrepreneurs are crazy, weird people Being an entrepreneur is not basically motivated by economics Why? RISK! I'll repeat: – risk risk risk risk risk risk – RISK RISK RISK RISK RISK – RISK RISK RISK RISK RISK! Starting a business is risky New ideas are untested. . . That’s why they’re new ideas! You throw an idea into the world. . . And see what the world says in response. There are thousands of variables you can’t control And you probably don’t have a lot of the skills you need Uncontrollable variables that affect your business Competition Technological change Interest rates Government policy Economic growth or contraction War and terrorism Strikes in other parts of the world Your employees’ personal problems Your investors’ personal problems Changing consumer preferences Skills that an entrepreneur might need Personnel Management Negotiation Strategy and business analysis Accounting Tax planning Inventory control Communications Planning Typing and computer skills Design Teaching Legal Crisis intervention! Firing people Whew! That’s a lot! Another reason to be an entrepreneur: constant learning – Sometimes it’s fun not to know what’s going to happen Still, entrepreneurship is UNCERTAIN In the U.S., 90% of new businesses fail What’s the spirit of the entrepreneur? Creative Excited about life and optimistic Independent Risk-taking And needing self-expression – In the U.S., if you just want to make money, become a banker And now, a true-life story. . . About Michael Melcher My life before I became an entrepreneur – Good at school • Harvard B.A., Stanford J.D./M.B.A. • What happens to smart kids? We live our parents expectations rather than our own lives. – Several “prestigious” mini-careers • Diplomat (with Robert Ogburn) • Management Consultant • Lawyer for big NYC firm earning $$$ What was I looking for? A career where I could be authentic I liked my jobs. . .at first But I wanted more! I wanted to be fulfilled. As a lawyer I frequently felt like a loser – “What am I doing with my life?” – “My work is stupid. I have no interest in it.” – Many of my colleagues had the same feelings! So. . . I ended up being an entrepreneur September 1999 a friend and I decided to try to start an internet company “World Citizen”-- an internet source for immigration services and information – no one had done this before Our plan: Write business plan Get investors Start operations Become successful, happy and rich! The reality: Wrote business plan: Sept - Dec 1999 – (make connections, get ideas, expand network) Looked for investors: Jan - June 2000 – almost gave up; hard to get people to give their money to you – during this period we had no income, but high expenses, especially in NYC Finally, found an investor! Our investor -- Anila Ventures of Palo Alto, California A small venture capital company Loved our idea “Incubator” structure -- we’d operate in their offices, they’d “help” with expertise Committed $1 million for a stake of about 32%. Willing to start the money flow before final papers signed. I was a happy CEO What happened next. . . July to Sept -- hired staff, started operations October -- things getting more complicated (personnel problem) And then…. All hell broke loose!!! We were affected by big economic issues October 2000 -- big stock market plunge Tech companies started to fail Venture capital companies started writing off investments, closing companies, calling in investments A dark cloud settled over the technology sector. . . And our investors went CRAZY! Freezing payments for expenses and salary Interfering in hiring and operations Constant demands to rewrite our business plan for no reason Threats to back out of investment AND dragging their heels on signing important documents Nov - Dec 2000 -- two of the worst months of my life! Felt totally unprepared for this time HUGE pressure -- threats by investors, combined with responsibility to take care of company and employees Needed to keep working, even though economy was BLEAK Woke up every day feeling sick Jan 2001 -- company died Investors pulled out after investing only about 50-60% of their commitment – hard to tell, since they were using questionable accounting All employees lost jobs Many bills not reimbursed Investors threatened to sue company and me; we also considered suing I had to close company In retrospect, what happened. . . Silicon Valley was a “gold rush” and attracted many greedy types Our investors were inexperienced in creating companies – didn’t know management – didn’t know crisis management Our main investor was basically a criminal and probably mentally ill On the other hand. . . Lots of crazy people function normally -as long as times are good. It’s when things are bad that you see people’s dark sides. Even with a good investor, we probably would have failed due to poor economic conditions As entrepreneurs, we did reasonably well, despite lack of experience A few lessons I learned about being an entrepreneur. . . Don’t delude yourself about problems – business partner – employee Move quickly and make things happen – need to finish things, not just make progress Leadership is making decisions amidst uncertainty A bad relationship is worse than no relationship What I gained from my experience as an entrepreneur Money? – Lost money, mainly due to foregone income Independence and freedom? – Yes… but also had HUGE responsibilities Challenge – A lot! I reminded myself frequently that this was an important objective for me -previous jobs had been boring. Other things I gained. . . Self-confidence – I made good decisions – I made ethical decisions – I learned things every day – My business partner and I did not violate each other’s trust Self-expression and creativity – It was all MY vision. No one else could have done exactly what I did. And guess what? I'm an entrepreneur again. When I finished World Citizen, I just wanted to get a job! The economy was terrible…and I didn’t really want a job I didn’t like Started a coaching & consulting business, helping other people and organizations be successful. What I now know about myself I like ideas I like connecting with people authentically I like helping others I like having a “voice” I am more interested in thinking up ideas than in executing them I like inspiring people more than managing them What is coaching? Working with clients to – clarify their goals – figure out how to achieve them – work with clients to keep them on track “It’s never too late to become who you might have been.” -- Fredric Hudson My advice to entrepreneurs Know yourself – what you really want, not what you think you are supposed to want Start doing it -- don’t wait! Develop your personal networks Better to talk than to keep things secret Remember,there’s no free lunch! (Be careful of outside investment.)