The Fringe

FringeEugene Kleiner, Co-founder of the VC firm, Kleiner, Perkins, Caufield & Byers, once said, “It is difficult to see the picture when you are inside the frame.”

A small percentage of people in each free-market society generate the jobs for everyone else. The people who create these jobs are solidly on The Fringe. They do not risk everything, work outrageous hours and put themselves under untold pressure because they want to. They certainly do not do it for the promise of riches. They do it because they have to, because they are driven to create something from nothing.

Berry Worth describes the motivation of the Founders of Vertex Pharmaceuticals in, The Billion Dollar Molecule. “They did it because they were absolutely certain it could be done, and to prove to themselves and the world that they could do it first. They did it to bash their competitors, to think themselves divine, to win, and to avoid the terrible, deathly anguish of losing.” This description is apt, as successful entrepreneurs intuitively know they will win. Losing is simply not an acceptable outcome.

Entrepreneurialism is not a choice. It is a compulsion. It is counter-intuitive and illogical for someone to put themselves into the uncertain, stress-filled environment of a startup. It is far more logical to take a 9-to-5 job with little stress and a lot of holidays. If it were a decision to be an entrepreneur, then most right-minded individuals would decide to turn back when they encountered the first inevitable startup crises.

Entrepreneurs want to matter. They do not want a job, they want a purpose. They want to make a difference and know that if they do not show up for work, important goals will not be achieved. In the early stages of their adVentures, entrepreneurs often sleep like babies – in other words, they wake up every thirty minutes in tears. Entrepreneurs live life on The Fringe.

If you are scratching your head, this blog probably is not for you. However, if you feel the compulsion of which I speak, then you are a kindred spirit, infected with the lunacy of entrepreneurialism. Life on The Fringe can be scary, but it can also be rewarding and exciting beyond your wildest dreams. If you are unsure whether you belong on The Fringe, you may want to check out Bank Robber or ATM Operator.

Safety in Numbers

Most people choose to live in the midst of The Herd. They seek jobs created by others, allow their destiny to be controlled by exogenous factors and are quite happy to punch the clock at 5:30, Monday through Friday, so they can catch their five hours of nightly TV.

Milling about in The Herd may be safe, but the safety comes at the cost of controlling your destiny. Yes, you can moo loudly and hope for change, but this is akin to honking your horn while sitting in bumper-to-bumper traffic. Lashing out in this futile manner may temporarily relieve your frustrations, but it will not serve to improve your position within The Herd. Once you realize that no one heeds your plaintive mooing, you must either give up and settle into a quiet, nondescript life within The Herd or realize that in order to command your destiny; you must depart The Herd and strike out on your own adVenture.

You might rationalize remaining in The Herd with the hope that you will lead it someday. Leading The Herd is certainly more fun than milling about its midst. However, even as a leader, you will be limited by The Herd’s collective lack of speed and flexibility.

Waiting to be anointed a Herd leader is also a high-risk strategy. It generally takes a long time to work your way up to the front of The Herd, just as it takes many years to rise to the top of most large corporations. Throughout this process, the possibility exists that a capricious factor, outside of your control, will preclude your attaining a leadership position. In most cases, by the time you realize that your dream of leading The Herd is a fantasy, the opportunity for you to join The Fringe has come and gone.

Should You Stay or Should You Go Now?

If like the Clash’s Joe Strummer, “the indecision bugging you”, then you may be ready to leave The Herd and join The Fringe. The longer you remain in The Herd, the harder it will be to eventually depart. Knowing when to leave The Herd is key to your survival. Too early and you risk perishing. Too late and you will be too old to thrive on your own.

To avoid the risk of waiting too long, pick an age or a specific life event (marriage, having a child, graduation, etc.) and use this milestone as the time to jettison from The Herd. This approach will give you adequate time to plan your exit, allowing you to leave The Herd with no regrets, no misgivings and without looking back. If you assume that you will strike out on your own someday, you may find that John Fogerty was right - someday never comes.

The Herd University

Before you leave The Herd, learn as much as can from its leaders. Master how to cross rivers, defeat predators, survive blizzards, etc. Do not leave The Herd as a calf. Work for a Big Dumb Company (“BDC”) before you jump into your first adVenture. Let the BDC train you and grant you opportunities to make mistakes on their time, on their dime.

Most successful entrepreneurs cut their teeth within The Herd before starting their own adVentures. For instance, P. Diddy worked as an intern for Uptown Records before creating his own Bad Boy label. Ray Kroc worked with the McDonald brothers for years before taking over McDonald’s and transforming it from a loose affiliation of regional franchises to an international corporation. In both cases, these famous entrepreneurs learned the ropes in a safe environment before striking out on their own. Ray and P. Diddy are hardly alone.

Enhance Your IQ

Point of view is worth 30-IQ points. You can greatly enhance your point of view, and thus your entrepreneurial IQ, by stepping out of The Herd. Ed Moldt, an Instructor at Wharton (not a lifelong professor, but a real-deal, serial entrepreneur) expressed a similar sentiment when he told me, “It is hard to see the opportunities all around you when you are standing in the middle of a crowd. However, if you lift yourself a few inches above the crowd, you instantly can see the opportunities that stretch from horizon to horizon.”

As Eugene Kleiner suggests, your point of view is better from The Fringe. Even when you are still part of The Herd, the view from its fringes is more expansive than from its bowels. By staying on the periphery of The Herd, you are in optimal position to first see and then take advantage of an upcoming prime grazing ground. The first step in leaving The Herd is to mosey over to its fringes, so you can gain a better point of view of opportunities which are beyond The Herd’s reach.

Cold Turkey Not Required

Begin your departure from The Herd by initially leaving for day trips. You can always come back to the safety of The Herd at night. Such short excursions will allow you to experience the challenges you will face once you depart from The Herd for good. In this way, you will build your confidence, contacts, and experiences incrementally. Each trip can last a little longer until eventually you are confident enough to undertake an overnight excursion. Such mini-ventures (see “Small Ideas, Big Benefits”) will pave the way for your exit.

Your smaller, more nimble herd will outperform the old herd every time. Your team will get to the waterhole first and will be able to sustain itself on smaller grass patches. Thus, you can pursue new markets that are further from the mainstream and too small to interest a BDC.

You will work harder in your own herd, but nothing limits the amount of grass or fresh water available to you. In short, the upside is boundless. In your own herd, you might experience lean times, but you never will be crushed in a stampede, like a middle-manager in a corporate layoff. In your herd, you control your destiny.

Listen Close… Do You Want To Know A Secret?

One of the most repeated statistics trumpeted in today’s popular press is that “Four out of five businesses fail”. This makes a great headline, but the underlying statistics supporting it are exaggerated and misleading.

When the statistics are viewed in light of startups established by educated and experienced entrepreneurs, the success rate of such ventures increases substantially. When sole proprietorships are removed from the statistics, the success rate of startups improves even further. Sole proprietorships, which are easy to form and easy to dissolve, come and go as the founders move to other ventures, accept positions with BDCs, leave the workforce to attend to their families, etc.

When high-tech businesses, founded by properly educated entrepreneurs are viewed in isolation, the survival rates are much more encouraging. According to The National Dialogue on entrepreneurship, which reviewed businesses started between 1998 and 2002, the following success rates are typical of high-tech ventures:

  • 66 percent success rate after 2 years
  • 44 percent success rate after 4 years
  • 50 percent success rate after 4 years (when ventures are excluded)

Do not tell your brethren in The Herd, but the success rate of high-tech ventures run by properly trained entrepreneurs is much higher than they imagine. Entrepreneurs with training and/or education in entrepreneurial skills consistently experience tremendous success rates.

In the event that one of your adVentures fails, The Herd will always take you back. Trying and failing is just a dry run for the day when you eventually succeed. Even adVentures that fail to result in a profitable exit should not be considered failures.

Failure is often rationalized by the expression: experience is what you get when do not get what you want. However, in the case of a startup, this adage is more than mere rationalization, because you always gain valuable experience from a failed adVenture.

The Fringe blog is intended to offer advice that your John Greathouse would share with you were you lucky enough to have an experienced entrepreneur for an Uncle. By standing on The Fringe, outside the frame, you can address the problem so eloquently articulated by Mr. Kleiner. Once on The Fringe, you will gain an enhanced point of view that will increase your entrepreneurial IQ and greatly improve your adVenture’s ultimate chance of success.

Stop mooing and start leading.

Welcome to The Fringe.

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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