“Why do you want to do a startup?”
Entrepreneurs are adept at discovering new justifications for doing crazy things, like founding a startup. These justifications—enumerated at angel, VC and other investment meetings—are key indicators of the entrepreneurs’ raison d'être. This reasoning is prominently accounted for alongside mission, differentiation, and business models in the qualification of an investment.
If you are saying to yourself: “I want to …”
1. “…start a business that solves a problem that I’m passionate about.”
The “classic” response that remains perfectly valid today (even though it’s a cliché)
2. “…build a company with smart people that look like me and fully support DEI.”
While this is relatively new, there are more women founders and CEOs and diverse ELT and BoDs starting new businesses and getting funding.
3. “…disrupt an industry.”
All I can say here is: thank you, Clayton Christensen, for developing and disseminating the best justification for doing a startup.
4. “…do a startup because entrepreneurship is in my blood.”
Many entrepreneurs are the children of entrepreneurs. Sometimes entire families have the entrepreneurial spirit. This justification is common and can be powerful, but it must be accompanied by an actual idea or business model, or team developing something special.
5. “…be a part of a business that starts out small and grows into something big.”
Growing a business is very satisfying but, for many, it is also intoxicating and addictive. This justification doesn’t really differentiate the entrepreneur or startup from the rest, as it is foundational to most entrepreneurship.
6. “…create a conduit for my ideas.”
Many product or engineering-oriented entrepreneurs find that startup work fits them best because they can translate their ideas into products, technology, and solutions to business problems, all of which can become businesses that generate revenues.
7. “…own and manage a new business.”
Startup technology companies are often the source of new business models that can become influential on Main street as well as Wall Street. This justification is a bit old school, but when coupled with both disruption potential and a big exit, it’s a good motivation for a VC.
8. “…do a wide-variety of tasks which allows me to wear different hats.”
Not the best justification for becoming a startup CEO but perhaps fitting for a founder or contributor. This aspect is not anchored by specific skills that address the startup’s challenges.
9. “…create a competitive, work-enabled outlet.”
This justification is favored often by current and former athletes, and former military, who frequently love startup life and entrepreneurship as an extension of their competitive nature.
10. “…freedom from corporate life”.
This reason attracts many lawyers, doctors, corporate managers and engineers, for example, to startups.
11. “…a combination of work-related autonomy and personal self-actualization.”
For people in the working world who subscribe to Maslow’s hierarchy of needs or are frustrated with traditional business, a reinvention of business life can be found through startups. For many VCs, though, this is not a compelling reason to fund a business.
12. “…produce a big exit”.
Creating generational wealth is a big driver for many people in startups, but it has to be grounded alongside justifications above 1 through 4.
One question that logically follows this listing of justifications: Do they parallel VC expectations? In other words, are these justifications acceptable to VCs? Of those listed above, numbers 1 through 4, and 12 itself, are strong reasons for VC funding a venture.
A follow-up question: How would you characterize justifications 6 through 11? Many VCs characterize these as highly personal—perhaps even “self-indulgent”—reasons for pursuing a technology startup, but a turnoff for funding a venture.
One startup justification of recent prevalence but dubious worth: “I want to build a startup with a work-life balance.” Sadly, fully committing to the startup lifestyle always requires a tradeoff in any work-life balance, and almost always compromises the “life” side of that equation.
I relate the most to the “disrupt an industry” justification. After leaving Microsoft I learned about disruption and more from Clayton Christensen, and that became my personal driver for being in the startup world. Today, my investment, advisory, and board activities are based on the degree of disruption that a startup can muster.
Throughout all this, one thing is clear: VCs need to understand the many interior motivations to continue in the startup life. There are myriad reasons we all enter this crazy world, and the first step is to understand which of these applies most to your own reasoning. Find and perfect your justification for pursuing startup life, and you’ll be well along the path to a happy and rewarding experience.