I was recently at an entrepreneurship conference, held at an upper-scale hotel in another city. Attending were budding, super-hopeful entrepreneurs out to score capital, and venture capitalists out to score “the next big thing.”
I was there for neither reason. I was present mainly to keep a finger on the pulse of entrepreneurship and see where it’s going, as it’s a passion of mine and something I frequently write about.
Following the final presentation session of the first evening, I found myself in the hotel bar, getting a nightcap and hoping I could engage in a meaningful conversation or at least eavesdrop on one.
It turned out to be the latter—but what I heard far outpaced my hopes.
Seated at the next table was a man who appeared to be in his late 40s or 50s, graying at the temples, in a subtle but dashing tailored suit, the tie removed, the collar open. Judging from the lines around his eyes, he appeared to have had a very long day—either having flown in early this morning or just being jetlagged from the time difference between his home and here.
He wasn’t alone long. Shortly there arrived a much younger man, his suit still impeccable despite the hour, his tie still in place. His hair was even perfect, stylishly combed back.
The older man stood and extended his hand, and smiled slightly. “You’re Doug, right?”
Doug took the offered hand and shook it heartily. “Yes, indeed! Thank you so much for meeting me, Dr. Abraham.”
“Not a problem.” Dr. Abraham gestured at the chair across the small table. “Please.”
They were both seated. Dr. Abraham asked, “So how might I help you?’
“You made a peculiar comment during my presentation today,” Doug said. “I was talking about how much entrepreneurship is growing, exploding even. You laughed at me and said, ‘Entrepreneurship is dead!’ Then you turned and walked out.”
Dr. Abraham raised a finger. “If memory serves, I didn’t laugh, I merely smiled. But then I did indeed make that statement, and then left.”
“Why? You’re a highly successful entrepreneur yourself. Aren’t you here to encourage more people to take it up?”
“I’m here to shed some light on the reality of being an entrepreneur. If some listen to me, understand me, and still want to move forward, great. But I’m also trying to save a number of others a lot of grief.”
“What did you mean by ‘entrepreneurship is dead’? Why did you say that?”
“Because in my opinion, it is dead. At least the way you’re pushing it. You’re here saying that anyone can be an entrepreneur—it just takes funding combined with the inspiration and the right idea.”
“But that’s true! When we evaluate a company for funding we take a lot more than that into account, but those are the basic requirements.”
Dr. Abraham regarded Doug with a slight grin. “Have you yourself ever started an enterprise? Got it up and running?”
“Well, no. But I’m a Harvard MBA and thoroughly understand the metrics and probabilities of the situation. I represent one of the largest VC funds in the country. I’ve seen to the funding of over 50 startups. I certainly know what it takes!”
“Do you, now? Yet out of those 50, how many have succeeded?”
Doug didn’t answer right away.
It didn’t matter—Dr. Abraham didn’t let him answer. “Let me see how close I am. I’ll guess that it’s somewhere in the neighborhood of 5 to 10.”
“What makes you say that?”
“Because an average of 80 to 90 percent of new startups fail, despite your super-complex calculations.” Dr. Abraham paused. “Am I right?”
Doug looked a bit sheepish, but then shrugged and sipped his drink. “Yes. But those are actually the odds. All we can do is calculate the different factors of the startup, come as close as we can and fund it accordingly. Hopefully it’s one of the 10 to 20 percent that don’t fail. Our investors do understand that.”
“But did you ever wonder why so many fail? What it is that your math isn’t telling you? And what it is about the 10 to 20 percent of the companies in your fund that do succeed and keep that fund alive?”
“We feel that we know all we possibly can, guided by the best math and the most educated minds in the world. That’s really all we need.”
Then it was Dr. Abraham who shrugged. “Suit yourself. It’s your money.”
They were both silent for a bit, each nursing their drinks. Finally Doug broke it. “All right, I’ll bite. I’ve got nowhere to go right now. If you’re so brilliant that you know why the failure rate is so high, I’d love to hear it.”
“It’s not that I’m so brilliant, it’s that I’ve been there myself. I know what it takes, above and beyond what you seem to be looking for. At least for a business that’s going to be profitable and sustainable.”
“What does it take, then?”
Dr. Abraham smiled and held up his almost empty glass. “Another round?”
Doug smiled and shook his head. “Sure.” He flagged the server.
Join us in coming weeks to see the fascinating turns this conversation took.