[Guest post by Sanjay Anandaram, entrepreneur-turned-investor, and a strong advocate of entrepreneurship in India. In this post, he discusses the "luck" factor behind successful entrepreneurs.]
We hear all the time about the amount of money that’s available to fund startups. For example, that private equity funds invested over $ 3.3 billion in just the first 3 calendar months of the current year. That VCs are always looking out for good deals as most of the plans they see merit little or no attention. That they invest in about 5-10 a year out of the 500-1000 business plans they get.
And so on…
But the truth is that a majority of deals that get funded are those that come through a referral or because the VC knows (of) the entrepreneurs; its natural because VCs don’t have the time to look at all the plans that they get to pick out the Rediff, Naukri, or Tejas Networks.
Deals that come through some trusted source or through a trusted filtering process are therefore valued higher and rise to the top of the pile of business plans. It is therefore easy to see how many plans don’t get funded. And also how competitive the race to secure funding really is.
Given this situation, what then makes a VC fund an unknown company started by an unheralded first-time entrepreneur? Imagine this situation: A first time entrepreneur in say, Bengaluru with degrees from Tier 2 educational institutions, average work experience in a regular job in a reasonably well-known company, but with no experience in building a business, no references you know or care for, and with no experience in building products or delivering productized services, sends you an email describing his vision of the way software will be used in the future.
Now ask yourself: Will you take that entrepreneur seriously? Will you invite the entrepreneur for discussions? Will you then fund the business to the tune of say, a couple of million dollars with no business plan? Answer honestly.
What then makes VCs fund companies started by such entrepreneurs? Sure, there is passion in the eyes of the entrepreneurs; sure, they have conviction and confidence; sure, they have researched the market and the business model; sure, they have a powerful business idea; sure, they know what they were talking about; But then so do many other entrepreneurs.
Is it the element of chance? Is it that elusive thing called luck? Is divine intervention? What would have happened to such a startup if the founder had not had a chance meeting with the VC in a conference? After all, it was only because the founder met the VC at the conference was he able to talk about his plan, a plan that made the VC resonate with his business idea, right? Surely that meeting was due to luck, right? Especially, when other VCs had rejected the idea?
Well, in our haste to qualify it as luck, we overlook the fact that the business idea and model had emerged out of research and market validation. Not from a pipe dream. We overlook the fact that the entrepreneurs at the startup were superbly prepared. And yes, they were in the right place at the right time.
Luck,is what happens when opportunity meets with preparation. Without preparation, opportunities cannot be recognized and capitalized upon. Without opportunities, preparations can go abegging. So the next time somebody ascribes something to luck or chance, ask them if they were adequately prepared to exploit the opportunity. It seems that “lucky” people constantly encounter such opportunities whereas unlucky people don’t.
A 10 year research project that led to the 2003 book The Luck Factor by psychologist Richard Wiseman has revealed that “lucky” people generate their own “good fortune” through four basic principles that every entrepreneur will do good to internalize:
i) They are skilled at creating and noticing chance opportunities
ii) Make “lucky” decisions by listening to their intuition
iii) Create self-fulfilling prophesies via positive expectations
iv) Adopt a resilient attitude that transforms “bad luck” into good
What do you think?
[The post first appeared in FE, Republished with author's permission.]
Yeah, most of it is what the Entrepreneur makes himself, but there does exist an X factor. Most important thing an Entrepreneur should have is the ability to hang in there. If he stays for long enough, he will find a way, he will get lucky.
“degrees from Tier 2 educational institutions”
I love this phrase
this is great . some food for thoughts . @ Ramesh if you are amused by this phrase let me tell you there is a self proclaimed VC/(Angle w/o wings) in Delhi who ask for % of score in school before listening to your plan . I meet him and i was shocked to see a pic of him with Bill G in his drawing room . i don’t think he would have asked the same Q to Bill G
jokes apart , coming back to the topic . a top notch VC from Sand hill ( i think it was Tom Perkins ) once said that defining property of any entrepreneur is that he /she understands a common man to an uncommon degree . specially when it comes to creating a market .
Look at Sean Parker , Evan William they do fit the description . don’t they??
but It sounds counterintuitive to the first requirement of Getting funded ( To be Exceptional,Top College,Top MNC ,MS from US ) this works fabulously as long as you are doing pure tech or enterprise stuff but fails the moment you look at consumer internet. statistically you can see that most of the successful consumer venture are done by unproven guys .
so this is a CATCH 22 . if you Truly become funding worthy exceptional you seize to be a common man . result ?? 23 cricket sites on a internet base of few million ( figure from previous boom ) , Dating site done by guys who never have to strive for dates,PETS.com,10 Airline Ticketing Companies,10 Local search ,and 9 Dysfunctional product from one company in 2 years .
Apart from the power of IDEA and strength of your team . what a VC Firm need is a recommendation and familiarity with your FACE . I seriously believe that Networking is the answer . and Thankfully for us
there are plenty of platform like Barcamp,MoMo,Proto where you can earn familiarity with these guys. things get tricky when we say “We are no schumi…WE are Geek ..We don’t do Card Swapping at Conference ”
All right !! You better read slashdot .
Luck certainly is a factor but i doubt it plays a pivotal role in getting funded . Luck play some part later in the game . My $0.02 Cents .
Its not Luck(I am currently reading Goal II by Eli Goldratt.
I completely agree with Prashant. Networking is the key.
But Ashish, whats with Tier 2 edu institutes?
This too is our issue.A “set” mindset.
->Sri
I would say one thing that separates successful entrepreneurs from the learners is persistence.
I am still a learner but my take away from each successful entrepreneurs is they persisted with their venture in the tough times and there will be tough times for every venture.