Ever wonder why some entrepreneurs build billion-dollar companies while most do not?
More intriguingly, ever wonder why only 6% of billion-dollar entrepreneurs (out of 85) succeeded with the VC Mindset while 94% did not?
Most people are not aware that there are two mindsets to building unicorns because the press, business schools, and the entrepreneurial ecosystem predominantly focus on the VC Mindset.
The reality is that billion-dollar entrepreneurs utilized two distinct mindsets to build unicorns – the well-known, heavily hyped VC Mindset, and the less-hyped, but more prevalent Unicorn-Entrepreneur (UE) Mindset, which more than 90% of billion-dollar entrepreneurs adopted.
#1. The VC Mindset: Financiers Control Entrepreneurs.
The VC-Mindset assumes that entrepreneurs need VC to start, launch, and build their venture. In this mindset, entrepreneurs seek VC to fuel their growth and typically do not prioritize control of the venture and the wealth it creates if they can retain enough stock to become wealthy if the venture becomes a unicorn.
The VC mindset focuses on seeking capital because the strategy is capital-intensive. The goal is to pitch the idea, as seen in shark tank, to secure angel capital and launch the venture. After achieving product Aha or strategy Aha but before proving Leadership Aha – when the entrepreneurs have proven the potential of their venture, but not their own leadership skills – they seek VC. In up to 85% of VC-funded ventures, VCs then replace the founders with a professional CEO.
Although only 6% of 85 billion-dollar entrepreneurs used the VC Mindset (Truth About VC), it remains dominant in incubators, business schools, and Silicon Valley.
· eBay exemplifies the VC Mindset. Pierre Omidyar started the venture and, as soon as he faced well-funded competitors, he sought VC. The VCs invested heavily, recruited a professional CEO, and took the company public in about 18 months. eBay became one of the most successful VC investments of all time. Omidyar, however, was diluted by both the VCs and the new CEO they recruited.
#2. The Unicorn-Entrepreneur (UE) Mindset: Entrepreneurs Control Financiers.
The UE Mindset also focuses on venture growth but emphasizes capital efficiency and control of VCs by the entrepreneur. The goal is to create wealth and to control it. 94% of billion-dollar entrepreneurs used the UE Mindset, which is 16 times higher than those using the VC-Mindset. The UE Mindset delays seeking VC until after achieving Leadership Aha to ensure the entrepreneur stays as CEO and retains control over the financiers (18%), or it avoids VC altogether (76%). Billion-dollar entrepreneurs using the U-E Mindset include Sam Walton, Bill Gates, Michael Dell, Michael Bloomberg, Jeff Bezos, Brian Chesky, Gaston Taratuta, and many others.
Why entrepreneurs should seek the UE Mindset!
Entrepreneurs can do better with the UE Mindset because it emphasizes:
· Skills that benefit everyone: While the VC Mindset only works for about 20 ventures out of 100,000 and works really well for about 15 home runs a year, according to VC Marc Andreessen, the UE Mindset is based on skills that can be taught to all and can help everyone.
· Skills help everywhere, including outside Silicon Valley: While VC-Mindset unicorns are concentrated in Silicon Valley., the UE Mindset entrepreneurs can be found all over the country and the world.
· VCs wait for Aha! The UE Mindset helps everyone get there. Simply coming up with an idea and a pitch is not enough. Anyone can pitch and no one can accurately forecast potential before Aha! Even Steve Jobs, one of the greatest entrepreneurs in history, was rejected by some of the world’s leading VCs. Entrepreneurs need to get to Aha to make their potential evident. The UE Mindset equips entrepreneurs with the skills and strategies to get to Aha!
· Most importantly – Entrepreneurs retain control and cut dilution. Loss of control and dilution due to VCs and hired CEOs can be detrimental – especially for those who secure early-VC. Entrepreneurs who delay VC or avoid it keep 2 to 7 times the proportion of wealth created compared to those who get VC early (Truth About VC).
MY TAKE: Getting VC is not success. Becoming wealthy is. The VC Mindset seems like a shortcut to riches, like playing the lottery. Only a few win. Even VCs cannot reliably identify the winners when they invest. If they could, why would they finance the losers? The Unicorn-Entrepreneur Mindset allows entrepreneurs to control their venture and the wealth they create significantly reducing the risks associated with VC funding.