The Curious Case of the Reluctant Entrepreneur. A hitherto unknown Conan Doyle story? No, rather the tale of a founder, “Olivia,” who refused to change her business model when faced with negative investor feedback. What should have been a relatively simple change of strategy became a Go/No-Go decision instead.
First, some background information. “Newco” had been in pre-revenue operations for more than a year and a half. It needed substantial outside investment in order to gear-up its manufacturing and execute its online sales plan. Initial feedback suggested that Newco’s model lacked defensible IP and would suffer financially when competitors knocked off its products. Fortunately, Newco could still license the technology in question. Problem solved.
Not really. Olivia objected. Why? Because the new model was more “limiting,” lacking the “open source” foundation of the original model. Olivia felt that this change would limit Newco’s long term potential, something she dreamed would have Facebook-like scale and implications someday.
Really? Facebook? Newco’s investor presentations and business plans made no mention of Facebook-like results, or anything remotely resembling a global presence.
What is fascinating about this true story is how often I witness its occurrence. It takes many forms. In its most common guise, it’s the story of an entrepreneur who pitches his/her five year financial plan to investors, but leaves unspoken his/her much grander dreams. By itself, this omission is not necessarily a problem. The difficulties surface when these entrepreneurial dreams conflict with short term corporate reality. Take the case of Joe, CEO of “JoeComp” a regional, foodservice-focused supplier with a profitable business model. Joe, however, dreams of success in the high volume, marketing driven, retail market, where he can make a real name for himself. When Joe hears about the possibility of selling to Costco, he jumps on it. Nine months later, JoeComp is out of Costco, its absence barely noticed, unless you happen to glance at the red font in the company financials, or at the pallets of unused retail packaging in its warehouse.
I have no objection to founder-as-visionary personalities, even reluctant ones . . . when their visions are stated and on record. Teams seldom do well achieving unstated goals.
Peter has spent the past twenty-plus years as an acting/consulting CFO for a number of small businesses in a wide range of industries. Peter’s prior experience is that of a serial entrepreneur, managing various start-up and turnaround projects. He is a co-founder of Keurig.
