Five Success Factors That Power Up Entrepreneurial Success

 In Blog

The article was written by Dr. Merom Klein PhD + Dr. Louise Yochee Klein PsyD 

Lifestyle entrepreneurs are not smart bets for angel investors. Lifestyle entrepreneurs do what’s necessary to build a business that maintains their lifestyle – not one that will scale exponentially and create wealth for investors.

Growth entrepreneurs are wired differently from lifestyle entrepreneurs. They’re in it with Courage to optimize wealth-creation and make a big bold difference. They’ll pivot away from their pet project or artistic interest if an adjacent market looks like a better, faster and less risky way to generate a return for themselves and their investors. They’ll relocate to another city or another country. They’re focused on building to achieve an exit – for themselves and for everyone else who bet on their success, including you.

It’s easy to spot some lifestyle entrepreneurs. Like us, they may center their lives around their grandchildren or around a community or work/life balance they want to maintain. They may have an artistic interest they want to express, or a cause they want to fulfill – that’s more important than optimizing their commercial success. They may want to take the investor’s capital and build a cozy cash cow for their families, rather than achieve an exit for you and other investors. They may have big egos or may lack the discipline to work for someone else.

Some lifestyle entrepreneurs aren’t easy to spot. They’ll tell you that they’re poised for growth. They “talk the talk” of wealth-creation and exit-optimization. But look a little deeper and you’ll see – they don’t have the Courage to take their idea or their product, and scale the business to deliver a return for their investors.

Fortunately, for investors who want to make decisions based on data and benchmarks rather than “gut feel,” there’s a good amount of research that’s accumulated about the differences between imposters and real growth entrepreneurs. These are encoded into the 5 success factors we assess when we’re invited into due diligence – and when the DD team asks the entrepreneur to complete our Courage Entrepreneurial Leadership Assessment.

Growth entrepreneurs fire on five cylinders. They have the Courage to AIM high, AROUSE passion, ASK openly, ALIGN interests and ADHERE to standards. Before you invest, we suggest you assess all 5 of these Courage growth factors. And they build that Courage with their partners and their teams. Any gap could red-line your ROI – and could mean that you’re dealing with an entrepreneur who “talks the talk,” but will choose lifestyle rather than growth under pressure.

Research from our own studies on Courage – and from Wharton, MIT, Stanford, Insead, Deloitte – show how growth entrepreneurs…

 

  1. AIM high to deliver an attractive ROI.

They have the Courage to look beyond their excitement about their discovery or invention – and engineer a solid business model. They show how the enterprise can scale to a level that makes an attractive exit a real solid possibility. They have the Courage to test their assumptions about product-market fit and can tell you about the addressable market and early adopters where they’ll get traction, as well as their plans to scale to profitability and an exit for you and other investors. Lifestyle entrepreneurs say, “We are building a wow product. We’ll figure out the plan when we get the capital.” Or, “It doesn’t matter that we’ve been losing money year after year. If you cover our losses and believe in us – we’ll do well and you’ll do well.”

  1. ASK openly with coachability and learning agility.

They are curious and coachable. They mitigate risks. They have the Courage to test their hypotheses about product-market fit and present data, not just gut feel, hunches or conversations with a few people who told them what they wanted to hear. They keep lines of communication open, even when getting feedback they’d rather not receive. They have learning agility to take new perspectives onboard if experts can justify their recommendations and show a better path to value-creation. Lifestyle entrepreneurs indulge their egos and their need to be right and in control. They stay cocooned in their silo and belittle experts from disciplines that could wrestle down and mitigate risks they’d rather not see. They rebut or litigate risk factors rather than mitigate risks. They surround themselves with “yes-people” who validate their hegemony, not diverse perspectives that sharpen their decisions.

  1. AROUSE passion to generate urgency and can-do confidence.

They are cheerful, positive, upbeat. When the going gets tough and questioning gets tense, they do have Courage to stay positive, resilient and confident. They also lift the Courage of others in the room – stepping to the podium or joining a teleconference with an energizing engaging presence. They create momentum and generate a can-do sense of urgency. They PowerUP inventive thinking and initiative, even when there are tough problems to solve. They have chutzpah – and bring it forward with a smile, that engages people and draws them into a positive energy field rather than pushes them out of the way. Lifestyle entrepreneurs are slow, plodding, cautious. They don’t know how to press down on the accelerator and create a sense of urgency that engages and excites diverse personalities.

  1. ALIGN interests to form win/win/win alliances.

They negotiate to enlarge the pie for everyone who contributes to their success. They build trust. They are empathetic and can explain to prospects “what’s in it for them,” in a way that is attuned to the other party’s economic and psychological motives. They build Courage so early adopters become champions and promoters – and take a risk by giving the entrepreneur the backing and endorsement they need. They are givers, who take care and make sure that you profit when they profit. Lifestyle entrepreneurs are takers, who negotiate terms, valuation and governance to come out on top and get as much as they can for themselves and their small loyal inner circle.

  1. ADHERE to quality, regulatory, ethical and usability standards.

They understand what buyers and channel partners need to see, to say, “Yes” and adopt innovative new products. They make sure things work as they should, so first-time buyers come back, buy more and tell friends to buy more. They have a realistic assessment of their own competence and gaps in their team – and have the Courage to hire the top talent they need, to fill in the gaps and round out their inner circle. They use systems, tools, playbooks, handbooks and contracts to make sure things work as they should. Lifestyle entrepreneurs aren’t aware of what early adopters will need, to become buyers and champions, have incoherent or half-baked plans, and overestimate their competence and readiness to deliver.

In a 12-minute pitch with an 8-minute Q+A, it’s easy for some lifestyle entrepreneurs to look like they have the Courage to be poised for growth. That’s especially true if they’ve been pitch-coached to make a great first impression – and come to the podium (or to an investor call) equipped to AROUSE passion, AIM high, ASK openly, ALIGN interests and ADHERE to plans and standards.

In DD, it’s tempting to be so impressed with 2 or 3 of these 5 Courage factors that you overlook or overestimate the others. Or to be so impressed with the product, IP and market opportunity, that you overlook gaps in leadership that could end up being costly. Yet, if you watch how the entrepreneur leads your team through the DD and if you ask the right questions and listen for the real answers, without a confirmation bias, you can get a more realistic assessment of the entrepreneur’s growth versus lifestyle Courage.

If you have questions, you may want to take a deeper look at the entrepreneur’s growth leadership with…

  • An objective assessment – like our Courage Entrepreneurial Leadership Assessment – which an entrepreneur can complete online in 20 minutes or less and give your DD team a profile on the 5 key growth leadership habits – so you see whether they know how to AROUSE passion, AIM high, ASK openly, ALIGN interests and ADHERE to standards.
  • A team profile that allows you to see whether they CEO has hired a team who all has the same gaps – or one that is diverse enough to cover each others’ blind spots and sharpen each other’s thinking
  • Site visits – that include 1:1 skill-based interviews and observations of the team in action – so you can assess how they think, how they take decisions, how they engage and use diverse perspectives and how they negotiate for win/win/win success
  • Reference checks – that give you 360-feedback about the entrepreneur’s strengths and development needs, if you ask the right questions and listen carefully to what’s said (and not said) in the answers

Can a lifestyle entrepreneur learn to become a growth entrepreneur? Yes, of course – if s/he has the desire to grow and the self-awareness to own the gaps and stretch beyond what gratifies his/her ego, self-interest, work/life balance and desire for power, control or hegemony. But if s/he wants to tell you why the gaps don’t really matter or why they shouldn’t or couldn’t stretch beyond what’s already comfortable – beware. You might be relying on a leadership team that doesn’t have the Courage to fire on all 5 wealth-creation cylinders, and the gaps in leadership could require more capital to recover from mistakes or could compromise your exit.

To assess an entrepreneurs’ mindset – and see if they’ve got the Courage to build a growth rather than lifestyle company – we’re happy to talk with you about the questions you can include in your K4-MA or K4-SE DD. Or, if you are a K4 entrepreneur and want to test your own Courage mindset to drive growth, we're happy to send a link to Courage Entrepreneurial Leadership Assessment so you can share the results with your K4-MA or K4-SE DD team.

Merom Klein PhD + Louise Yochee Klein PsyD are 25+ year veteran business psychologists who assess leadership potential and develop leadership acumen for investors, entrepreneurs, VC-backed growth companies and corporations upgrading their innovation + transformation initiatives. They’ve authored assessments, simulations and books on Courage + Innovation Leadership. They lead Courage Growth Partners, a Sponsor and Mentor to Keiretsu Forum Mid-Atlantic and Keiretsu Forum South East members and entrepreneurs.

© 2019 CourageInstittute.org • Permission to distribute granted to Keiretsu Forum Mid Atlantic + Keiretsu Forum South East

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