5 Keys From Billion-Dollar Entrepreneurs
Unlock Your Potential
Can entrepreneurs use the secrets of unicorn-entrepreneurs to effectively capture their growth potential, and can investors identify potential unicorns before the pivotal ‘Aha!’ moment to find high-potential ventures with less risk? Do concepts like “product-market fits” and platforms like Shark Tank truly predict potential, or are they false flags?
The Challenge of Being First-Finders
Entrepreneurs often struggle when they are not the “first-finders” of the unicorn path. Similarly, investors feel frustration when they fail to spot unicorn potential before the ‘Aha!’ moment, when valuations are still reasonable. The ‘Aha!’ moment is when potential becomes evident.
The Unfair Advantage of Financial Literacy
VCs have a significant advantage because financially needy entrepreneurs often turn to them for capital after achieving after the ‘Aha!’ moment when their potential is already apparent. Despite this edge, VCs fail in roughly 80 out of 100 ventures, with only 1% of their investments becoming unicorns. This low success rate explains why only a handful of VCs, around 20, are consistently successful. Marc Andreessen estimates there are just 15 “home runs” per year, which the top VCs typically finance. This track record suggests that small angel investors are likely to fare worse.
Financial Literacy and Unicorn Potential: The 5 Signals
Can investors and VCs improve their ability to identify unicorn potential? Can entrepreneurs sharpen their strategies to better capture it? Here are five signals that can help to spot unicorns:
#1. An Emerging Trend
From Sam Walton (Walmart) who capitalized on the big-box retail wave to Travis Kalanick (Uber) who revolutionized transportation by leveraging the smartphone trend, nearly every billion-dollar entrepreneur successfully identified and entered an emerging trend. Look for an emerging trend you can focus on, positioning yourself to ride the wave and dominate it.
#2. Dominant strategy in an emerging trend – Beyond product-market fit.
Identifying a product-market fit is just the start. You need to find the right product-market- strategic-group fit to dominate your emerging industry. Bloomberg dominated financial data. Microsoft dominated PC software. eBay dominated Internet auctions. Facebook dominated social networking.
#3. Taking Off in the Emerging Trend.
Achieving takeoff in an emerging trend is one of the most challenging step for a growth-seeking venture. Emerging trends are hazy and subject to rapid changes in technology, market dynamics, and competitive strategies. Entrepreneurs must not only adapt to these uncertainties, but also carve out a clear path to achieve takeoff.
#4. Taking Off in the Emerging Trend – Without VC.
Achieving takeoff requires a unique blend of product skills, strategy skills, sales skills, finance skills, financing skills, launch skills – and luck. Few do it well, and even fewer do it without VC. Yet here is the surprising truth – 94% of billion-dollar entrepreneurs achieved takeoff without VC. Icons like Sam Walton, Bill Gates, Michael Bloomberg, Jeff Bezos, Mark Zuckerberg, and Brian Chesky exemplify this path. Some got VC after takeoff. Delaying VC allowed these finance-smart entrepreneurs to stay in control of the venture and the wealth created.
#5. Finance-smart and control-smart skills to lead and dominate.
99% of 85 billion-dollar entrepreneurs succeeded with finance-smart bootstrapping skills until strategy Aha. Moreover 94% succeeded with control-smart growth skills to dominate – whether they eventually used VC. Unicorns don’t simply happen because VCs are involved – it’s the unicorn entrepreneurs who are key. For example, despite being one of the Top 20 VCs, Andreessen Horowitz just closed its Miami office because “nobody was showing up.” In contrast, South Florida entrepreneurs like Gaston Taratuta and Joe Martin, started their unicorns with just $2,000 and $375 respectively – and never used VC. They used finance-smart and control-smart skills.
The Key to Spotting Unicorn Potential!
Unicorn potential lies more in the entrepreneur and their skills than in the idea or the pitch. However, unicorn-skills can be difficult to identify before real proof. Steve Jobs, one of the greatest entrepreneurs, was rejected by about 10 VCs. Additionally, up to 85% of entrepreneurs are fired by VCs after funding.
MY TAKE
Unicorn success stems from entrepreneurial skills, not merely “product-market” fit, which only shows potential viability. The entrepreneurial ecosystem needs to focus on skills – not hype-driven pitch contests and shark tank theatrics. Meanwhile, product-market fit has become a formulaic mantra of the VC-based ecosystem. No wonder most VC-funded ventures fail, and most VCs fail to deliver.
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