Dr. Earl R. Smith II

Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

A hard fact is that the sins you committed along the way will effect your ability – limit the possibilities – of a major score when it comes to selling your company. Nowhere is this more true than who you have decided to make deals with along the way.

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Some years back there was an organization that ran an annual event focusing on the love affair between the venture capitalists and entrepreneurs. I began attending during the late nineties and found the cultural dynamics so interesting that I continued my annual visits until the event finally was no more. One of the most interesting things about the conference was that the panel composition stayed the same over this period – two venture capitalists, one CEO who had received investment and another who had built a company without outside investment.

The most striking change over the years was the attitude of the audience towards the various panel members. In the early years,

• The venture capitalists were seen as minor gods – boon givers who could make or break a company with a single work
• The CEO who obtained investment was the person you wanted to talk to because he had figured it out
• While the poor sap who built his company without investment was looked on with disdain as someone who just did not get it

Fast-forward a decade or so, and how things had changed.

• The venture capitalists were now seen a clumsy oafs who had bungled deal after deal
• The poor sap who had received investment was seen as one of the guys who had screwed it up for the rest of the pack
• Everybody wanted to talk to the CEO who had built a sixty-million dollar business without any outside investment

During the last event of the series, the standard patter of the various parties had changes markedly.

• The VCs, who during earlier years worked hard to push the limits of hubris, were offering a new message – ‘back to basics’ – and could not figure out why the audience was so hostile to them (and the audience was hostile)
• The CEO who had received investment had difficulty figuring out why he was considered the fool on the panel
• The CEO who built a business without investment got to talk a lot about his approach to growing a business and ways to achieve that growth without selling the company’s soul to the money lenders

After the session was over, most of the group gathered around the no-investment CEO. A few were waiting to talk to the ‘investment’ CEO – probably to commiserate. The VCs seemed to be of no interest to the audience at all. Somewhat forlornly, they began to walk down the aisle towards the door. As they approached, I heard one of them say, “Yeah, back to basics. What the hell is a basic?”

In prior articles in this series, I wrote about some of the difficulties that current conditions bring to attempts to organize exit strategies. I would expect that most of you who have read them would be of the mind to find an alternative to risking that gauntlet. This chapter and the one that follows are about that alternative. It is about what is appropriate and sensible given current conditions – it is a discourse on basics. As the great mythologist Joseph Campbell was fond of saying, “When you are falling, dive!”

Any discussion of ‘basics’ needs to start with the initial reasons and motivations of the entrepreneur – why they decided to start the business in the first place. Back in the bad old days when investors had more money and less fear of losing it, an entrepreneur could start a business with the idea that very soon investors would come in and take all of the risk for part of the action. Much as bookies lay off bets and take the margins, these start-up specialists would

• found a company
• froth it up
• get a bunch of investors frothing at the mouth to shove money at them
• change the money into equity or the possibility of equity
• and then settle in to find somebody to buy the company or provide another financing round

Those halcyon days are no long gone. In current conditions, the best motivation for founding a company is that you want to build in into a source of income, a source of jobs for others, a source of wealth and a gift to future generations of your clan. In other words, you chose the business you want to build because you cannot think of life without being in that particular business. (A Basic)

Second, you start a business that you know something about and have a passion for. (A Basic) Making money and getting rich are not passions – they are avarices. Maybe you want to provide some service – a friend started a company to help protect law enforcement officers. Maybe you want to follow a passion – another friend sold his technology company and started a wine eco-tourism business. Maybe you want to push the envelope and add to humankind’s collective knowledge – still another friend has embarked on a high-risk effort to solve a very hard system-modeling problem.

Third, you do not pay any attention to the exit – you are in it for the long haul – to build the business into something you and your team can be proud of. (A Basic) I describe this as the ‘relationship’ issue – the relationship between and entrepreneur and the latest project. You go into a bar and meet somebody new. After a while, it becomes clear that their agenda is to go somewhere, have sex and then forget it ever happened – on to the next one-night stand. In another bar you meet somebody else who is clearly interested in you as a person – seems to have substance – is engaged in the world in a far less adolescent way. What do either or these strangers say about their vision of you – and what odes it say about you if you choose the first stranger?

To Be Continued in Part 5

© Dr. Earl R. Smith II

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Related Articles:

• Exit Strategies Under Current Conditions
• Exit Strategies Under Current Conditions – Part 2
Exit Strategies Under Current Conditions – Part 3
• Attitudes, Agendas, Interventions and Compromises
• Change – Two of Many Perspectives
• Entrepreneurial Planning and Goal Setting

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Dr. Smith is a proven senior executive, successful entrepreneur, published author and public speaker. He serves on boards of directors and advisory boards or as a strategic adviser to CEOs. Dr. Smith specializes in turnaround management, strategic planning, leadership development and executive coaching. He also works as an executive and/or life coach in the areas of personal growth and spirituality. He is the author of Amazing Pace: Turbo-charged Business Development – a book that shows how Advisory Boards can dramatically increase revenue. Dr. Smith is also the author of Dream Walk: Parables for the Living – a book of Raven Tales and exploration.

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