Eighteen years ago I posed this same question to my mentor, The Minister of Leaves, as I fumbled about trying to start The Republic of Tea. That was during the recession of 1990-91 and I remember the daily news was bleak and discouraging, just as it is today. At that time, as a young man (and the father of a 2 year old son) I was trying to muster the courage to found a new company in a very difficult economic climate.
“Always and never” was his confounding zen-tinged response.
Today we face an even more severe and widespread economic environment with perplexing global threats and accompanying opportunities. A young entrepreneur asked me this question about timing the birth of a new venture the other day. Here are some of the thoughts I shared:
1. Look for broken systems that spell opportunity. We now have enough information in our society to definitively know that certain sectors of the economy are fundamentally broken and are no longer sustainable in their current forms. Healthcare and energy efficiency are multi-trillion dollar market sectors where Physic Ventures is actively cultivating new ventures. Out of an acknowledged system failure there is normally an openness by entrenched institutions to experiment with innovative solutions. These are the openings, resulting from fundamental shifts in systems of supply, that entrepreneurs exploit.
2. Develop a deep understanding of un-met needs. The economy of 2009-10 may become known as the era of un-met needs: Unprecedented unemployment, tens of millions of uninsured, a lingering real estate crisis and a negatively transformed retail consumer sector. All of these system failures should force or speed-up shifts toward trial and adoption of solutions that are cheaper, faster and more effective than conventional, soon-to-be obsolete approaches. It’s in this fuzzy in-between-ness where entrepreneurs do their best work. Many great new ventures grow out of an entrepreneur’s deep and personal understanding of a specific problem or un-met need and how the system in which it exists functions (or doesn’t). Ventures that address real needs—“must -haves”, rather than “nice-to-haves”— tend to endure and thrive in short and long-term timeframes.
3. Think “cross-over hits”. Successful entrepreneurs learn to find their way into niche opportunities that have the potential to scale into very large businesses. Alan Patricoff, the founder of APAX Partners, once said that an entrepreneur should focus on very large market opportunities because “you are going to end up exhausted building a new business anyway so you might as well be focused on building a large one”. With that said, entrepreneurs need to develop resourceful ways of entering niche sub-markets just ahead of the waves of activity, adoption and structural change that will ultimately drive rapid scale.
4. Keep your overhead low and build a real business. With capital resources tightening and becoming more selective in both the angel and institutional venture communities and credit markets frozen, entrepreneurs need to think about fundamentals. Revenue, margins and cash flow flows from sound business models that can acquire new customers in efficient ways while generating sustainable margins. New capital is attracted to these kinds of businesses, assuming there is an appropriately sized market opportunity on the other side of the investment horizon. I always encourage venture builders to keep their overheads low—both psychic and physical. A low burn keeps options open and gives the game more time to play out. We often can’t control the macro dynamics that drive change in a system, so being committed to a positive vision while staying unattached to outcome is an effective way of keeping psychic overhead low. And a highly frugal and resourceful demeanor doesn’t hurt either.
5. Keep an optimistic and persistent focus on cultivating opportunity and mitigating risk. Make meaningful progress toward your short and long term goals every day. Limit your exposure to television news. Stay three steps ahead of the disastrous present and place your energy behind a long-term vision that centers on positive impact and healthy outcomes. Learn as fast as you can and ask people smarter than yourself for help.
I always get a great deal out of your blog. It seems to remind me what’s important.
Thanks for the article. Easy to see how it applies to our business.
As the president and ceo of the San Francisco Zen Center I love the word zentrepreneurship, which is a new one to me. I very much appreciate the advice to keep “an optimistic and persistent focus on staying three steps ahead of the disastrous present and place your energy behind a long-term vision that centers on positive impact and healthy outcomes” — not sure I know exactly what you mean by “disastrous present” though… I notice a challenge for our group is how to stay in the present moment and stay connected to a vision of a better future. Very challenging some times. Thank you for the thoughts.