I recently heard a discussion about the entrepreneurial mindset, and what that means. The opinion given to the audience by the speaker was that an entrepreneurial mindset was one that takes big risks. Based on this theory of the entrepreneurial mindset, if you don't take a big risk, you won't get a big return. Therefore as an investor, the speaker concluded, we need to find people who are willing to take big risks, because venture capitalists are in the big return business.
I find this opinion simplistic and if this dogma is left unqualified, it can result in very dangerous thinking. In fact, I would define the entrepreneurial mindset completely differently. Its not about the size of the risk as the speaker alluded to, its about how you approach that risk.
The problem with the definition above is that we cannot differentiate between an entrepreneur and a speculator. Some might think the two are the same, but I believe that there is a difference. Let me explain:
The only similarity between the speculator and the entrepreneur is that both take big risks. However how the two approach the risk is completely different. The speculator is an individual who hopes he will make money on an investment. He places a bet and accepts the odds that are given to him. He prays and hopes that he is correct. He buys a lottery ticket, he buys a stock on a stock tip, he hears that people have been making money on property, and buys an investment property for rental.
An entrepreneur on the other hand does not accept the odds given to him. The mindset of an entrepreneur is that he believes that he can change the odds through his actions or belief system. Therefore, when other people look at a opportunity and sees risk, an entrepreneur looks at that same situation and thinks that those odds don't apply to him, and he has a defined and actionable strategy to mitigate these risk factors.
This is why when Elon Musk looks at the rocket business, while other people see intolerable levels of risk, Elon sees opportunity. He sees the ability to take actionable steps to redefine the cost structure of the rocket business. This is why when other individuals thought we were crazy to try and start the Asian Food Channel, me and my business partner saw a way of launching a TV channel using significantly less capital and have a cost structure that is radically different from the traditional broadcast business. We did not accept the odds that were given to us. We believed we had a way of changing those odds so that the risk was lower than what other people perceived them to be.
Looking at it from a different angle, the speculator and the entrepreneur face fear differently. A speculator looks at the potential of making a significant upside, and the greed and excitement of potentially succeeding blinds the fear from his mind. This is why when you hear property agents people tell you tales of how people have made big money from flipping properties, and use that as the only reason to try to convince you to buy a property, that either your bullshit meter goes through the roof, or you forget your fear and part with your money.
The entrepreneur however, has a different mindset. A good entrepreneur faces the fear head on, and realises that his risk of failure is high. However he does not let that stop him from moving forward. Unlike a deer in the headlights, a great entrepreneur does not freeze up. Instead, he uses that fear to motivate himself to action. He realises that he has to start forming a strategy to lower his risk profile, and therefore increase his probability of succeeding. He works hard to find advisors, great investors, supportive customers, he searches night and day through his contacts to hire and convince talented individuals to join his team, he obsesses about the competitive dynamics of his chosen industry and finds ways of gaining an edge over his competitors. He feels the fear and does it anyway.
When we meet people who's only answer to why they want to be an entrepreneur is because they want to make money, we usually don't invest in them. In fact, I recently told someone that if they wanted a surefire way of making a living, then dentistry is not a good bet. People always will need their teeth cleaned, and its hard to see robots doing this job in 30 years time. This is because very few people truly have an entrepreneurial mindset. These people are hard to find, and therefore we spend alot of time just talking to potential investee companies and see if they are merely speculators, or smart, ninja like entrepreneurs.
This is why venture capitalism is ultimately a business about people and an intuition about what makes a good entrepreneur tick. When we meet people with limiting beliefs, we call them the naysayers. When we meet people without limiting beliefs but with no actionable plan, we call them dreamers. Only when we meet people with big ideas and a plan on how to get there, do we then call these people entrepreneurs.
Therefore our definition of an entrepreneurial mindset is "the mindset to take big risks, but with a belief and actionable plan to mitigate these risks, using the fear of these risks as motivation to push themselves forward in their venture"
If you know anyone that fits this description, please contact us and we will only be too glad to spend time with them. Happy Chinese New Year and may the year of the rooster be one filled with the strength to push ourselves forward in whatever endeavor we choose to engage in 2017.