What is the key to a successful venture? Some may say hard work and dedication yet as time goes on opportunities often go to those with an inside track or connection. Is it all about who you know then? These people often run into adversity as they step into fields where others with more experience and extensive qualifications are currently competing. This mine field is something that everyone in the business sphere must deal with and comes down to credibility and networking.

            In the section Wasserman begins to discuss the different requirements and questions that an entrepreneur should be asking themselves before they make a risky decision, that like discussed earlier in the book, will have long term consequences on both the firm and those associated with it. Through the process of evaluating oneself and the resources at one’s disposal it is important to weigh the passage of time and whether it will positively or negatively affect the opportunity you are pursuing. While using examples of entrepreneurs that have previously been successful, we see Wasserman contrast ventures and resources to determine the proper procedure for launching a successful venture.

By all accounts it is much harder to start a business without experience in the field and the connections that comes along with it. For younger entrepreneurs it can be incredibly difficult to get in contact with those towards the top of the system. Working internally may expose you to others that are transcending within corporations. These connections overtime may become valuable in ways not previously conceived. The drawback of establishing this groundwork is a sacrifice of time that could otherwise be used to develop the venture. An alternative Wasserman points out for youthful prospecting founders includes the use of school resources such as fellow students and professors.

            While looking into the social capital and networking I came across the 6 degrees of separation. When considering whether establishing a network is important one should consider the fact that on average any person is connected to any other person anywhere in the world by 6 contacts. This is already incredible to imagine, but during my research I found that Facebook recently did its own study to test whether the world is becoming more connected as their company mission statement suggests they strive for. According to their study

“Each person in the world (at least among the 1.59 billion people active on Facebook) is connected to every other person by an average of three and a half other people. The average distance we observe is 4.57, corresponding to 3.57 intermediaries or “degrees of separation.” Within the US, people are connected to each other by an average of 3.46 degrees.”

This begs the next question of how important these contacts can be when used correctly. This reminded me of a section in the book “pencils of promise” written by Adam Braun. In the book Adam describes his journey going from someone with a dream and no resources to the founder of one of the world’s most influential educational non for-profit organizations.  One of the pieces of advice he offers is

“It’s the presence of others who are smarter, kinder, wiser, and different from you that enables you to evolve. Those are the people to surround yourself with at all times.” If one doesn’t give themselves the chance to establish these much-needed connections through their actions, then they won’t have an environment that encourages personal growth.

According to Adam the social circle that you surround yourself with is the most important component of successfully seizing opportunities.

This wishful and philosophical thinking is a great exercise for one to use to consider the potential of his firm, but it doesn’t pay the bills. According to BusinessKnowHow.com one of the top reason’s businesses’ fail is because the founder underestimates the capital required to establish a venture. Nothing brings a person with their head in the clouds back down to earth faster than a bank statement or financial failure.

Yes, entrepreneurs are defined by our society as the ones that shatter the mold and take the risk but by no means should someone blindly follow a hunch or dream without weighing the possible pitfalls or shortcomings that may arise. In the beginning of a venture it is important to understand that negative cash flows should be expected. Most entrepreneurs don’t receive a paycheck for the first several years that they are in business. Taking the time to develop social capital in the work force and gain experience in a desired field can be a hugely beneficial missed opportunity for entrepreneurs rushing into business. The financial security that comes along with a constant paycheck can not be understated and should not be expected during the early stages of one’s venture.

            This section is not meant to scare any potential entrepreneurs out of investing but rather to emphasize the importance of careful and strategic planning. With all the freedom that comes along with the new position and the excitement at the prospect of flight, remember Icarus and keep an eye on the ground

The first step is almost always the hardest to take when it comes to a venture and the risk almost always falls entirely on the founder. In another section of his book Adam Braun talks about his first step of depositing money into a bank account to kickstart his dream. With just $25 to his name at the time he took a step that would seem reckless and foolish to anyone with common sense. It is the idea of instincts and common sense however that often misleads many. An entrepreneur can mitigate his overall risk through small experiments that test the waters without the financial risk of destroying one’s credibility and financial holdings. By doing this a person can start taking the steps needed to convince others of their dream while learning about themselves and their ideas credibility through real world market tests.

            Both financial and social resources are needed for an entrepreneur to get off the ground and start their firm. Just like the previous blog post regarding the resource dependency theory these decisions must be weighed in order to maximize value in mitigate risk. This section of the book is important to take to heart because it discusses the importance of timing and development in the firm’s early life. It is up to the entrepreneur to take the necessary steps to gain the experience and finances needed for the future without sacrificing too much or showing your whole hand.

References

https://research.fb.com/blog/2016/02/three-and-a-half-degrees-of-separation/

https://libjournals.mtsu.edu/index.php/jsbs/article/view/112

https://corporatefinanceinstitute.com/resources/knowledge/finance/business-life-cycle/

https://www.businessknowhow.com/startup/business-failure.htm

Almost everyone in the business world can agree on the fact that any venture that wants to reach an end game above and beyond the average should be started with as little outside financing and investments as possible. With all the uncertainty in the world of entrepreneurship the only certainty will be that investors and creditors alike will expect their money back with interest. For an entrepreneur this can mean the end to a venture before it even begins. When starting a venture, it is important to understand the key resources and players that you will need on your team before jumping into competitive markets. It is during this stage that Noam Wasserman gives up his first advice for prospecting entrepreneurs. In the book founders’ dilemmas, he poses an interesting question that many entrepreneurs may not know the answer to before starting their venture. He insists however, that the notion that an entrepreneur may not know the answer can lead to inconsistent decision making and an ultimate failure of the venture all together.

               In the first section of the book Wasserman brings up the resource dependence theory to explain the contradiction and challenges associated with chasing both wealth and control. This economic theory states that the acquisition and dependence on outside resources have a profound effect on the decisions that a firm and founder must make in order to accumulate value. Wassmerman suggests that control and wealth each have a different strategy that must be followed in order to reach the founders desired outcome. These include early firm decisions such as venture capitalist investments, cofounding and financing through a lender. He goes on to explain that each seemingly small decision made, even those that seem trivial or common sense at the time, often lead to long-term consequences.

               Something interesting I came across while seeking information on the research dependency theory was that many regard resources as a basis for power in the business world. This begs the question as to what the entrepreneur sees as power and in tern will be reflected in the usage of those resources. For example, if the business wishes to maximize the wealth of the firm, then clearly the entrepreneur equates money with power and therefore is willing to dedicate resources to achieving it. In contrast if the entrepreneur seeks out a controlling equity stake or freedom to guide the firms actions you might see them invest more money from non-equity related financing or pay more out of pocket. This strategy often causes large short-term losses but in the long run allows the controlling equity to stay with the founder. The founder seeking control must also be wary of early round investors during the seed stage. The earlier the founder seeks investments the riskier the investment will be for venture capitalists. Higher risk always means that the investor will need larger shares of the equity to guarantee that they can recoup their money if the business was to fail. Another point made in the chapter was the dangers of over confidence and the inability to see additional opportunities because of the blinding belief that entrepreneurs often develop in their own abilities and judgment. These two sections together reminded me of a quote from my undergraduate entrepreneurship textbook that I wrote down among many others

Jack Garson, a successful owner of a law firm, said when asked about startups and financing

“You don’t have to open your dream business on the first day. It is better to start with a successful hotdog stand, than get halfway through the construction of a full-service restaurant and run out of money”.

 This quote sums up the excessive confidence and the overzealous attitude that many entrepreneurs fall into when starting a firm. This often leads to the loss of both wealth and control as Wasserman explained and can lead to founders losing the ability to even match their opportunity costs rather than excelling and realizing their dreams.  The real danger of this Dilemma is that it comes at a time when the entrepreneur is inexperienced and often ill-equipped to make it. New ventures are vulnerable to many external threats but according to Wasserman most fail because of internal inconsistencies and management team failures. I believe that Wasserman is correct in warning against the dangers of over confidence and highlighting the notion that a founder must know themselves before they can create a path for others to follow in the form of a venture. Without a well-known self-identity and consistency in decisions and values the firm won’t get through the rigorous challenges that ensnare 50% of businesses in the first 5 years of operations (US Bureau of Labor statistics).

Every story has a beggining…

Ill start mine with one of my favorite quotes from a successful social entrepreneur.

“Big dreams start with small unreasonable Acts” -Adam Braun

This blog serves as my first attempt to communicate my desires and passion with others that share my interest. Dreams often seem unobtainable but I’ve found that with faith and perseverance anything is possible.

Please join me on this journey… and together we can create a new story that will change the future!!!

“Don’t ask if a dream is crazy… Ask if its crazy enough”-Collin Kaepernick