Uber. Facebook. WhatsApp. Instagram.
Tales of billion-dollar acquisitions and life-changing business deals on a world scale have succeeded in drawing the young and the young-at-heart to what is arguably the world’s most attractive business profession – technology entrepreneurship. Similar to the hordes of people who swarmed across California in search of gold during the gold rush era, a new movement has begun in California (Silicon Valley, to be exact), and has spread across most of the developed and developing world.
Once one gets the entrepreneurial itch, one has to scratch it. Many young people get bitten by the entrepreneurial bug while studying for bachelor’s, master’s or even doctoral degrees and leave the prospects of a juicy corporate career to join the ranks of optimistic techpreneurs.
At its core, a ‘’venture-backed’’ technology startup is a high-growth enterprise that is invested with large resources and which, in turn, is expected to deliver large returns to founders and investors. More than 70% of them fail to achieve these lofty goals, but the few unicorns that exceed the venture capitalist’s expectations, manage to compensate for the rest of the losses.
The business implications of this type of venture are as follows:
- They start out little but are expected to grow quickly
- They are financed by several rounds of angel and/or venture capital investment
- If successful, investors usually exit the company through an initial public offering on a notable Stock Exchange or through an acquisition by a larger behemoth. If unsuccessful, the company is subjected to a sad, melancholy shutdown.
The lifestyle implications of this type of venture are as follows:
- The entrepreneur should expect to put his personal life on hold for the period of time it takes for the company to scale. As Paul Graham mentioned during one of Y-Combinator’s Startup School classes, the experience of managing a scalable startup can be likened to ‘’catching a dragon by its tail.’’
- The immense investment by the venture capitalist subjects the entrepreneur to immense pressure to grow. One needs to be ready to ‘’give one’s all’’ for business growth.
Most founders of technology-based businesses have a background in computer science and/or engineering – they are the stereotypical geeks. However, they often lack the managerial skills to take the company to the next stage and so they are usually replaced by a more experienced CEO, further down the road. However, they agree with this loss of control as ‘’Owning 17% of Facebook is better than owning 100% of nothing.’’