When entrepreneurs start thinking like corporate buffoons
I was a brick and mortar entrepreneur all through my 20s, but watching my friends ride the dot-com wave of 1999 was too tempting even for me. My buddies weren’t founders or entrepreneurs, just regular working guys granted stock options that, despite their marginal contributions, made them overnight paper millionaires. So at the age of 29, I decided to take a job in corporate Silicon Valley.
Over the next 18 months, I would witness incompetence so laughable that it seemed to come straight out of the movie "Office Space." It was then that I decided it was a safe bet to assume that anyone who had only worked within the confines of corporate environments was probably a buffoon.Watching the way this company operated, I realized the difference between an entrepreneur and a corporate buffoon can be traced back to one thing, responsibility for the bottom line. In most corporate environments, nobody except the C-level execs are directly connected to profit and loss. And in a bloated venture-funded environment like the heyday of 1999, the C-suite wasn’t really connected to the P and L either. Instead of bottom line contributions, corporate employees are usually measured by some random metric that is much more easily manipulated than the bank balance.
For me, a formerly bootstrapped entrepreneur, this corporate world of free spending expense accounts and lack of responsibility was absolutely bizarre. Not only did nobody really know what was going on, but nobody even seemed to care. Even “back of the napkin” estimates showed that the company was a train wreck waiting to happen, but the various managers all pointed to their department metrics and boasted of their success. Watching the utter waste was an entrepreneur’s nightmare.
I realize I’m making gross generalizations based on limited observations, and I expect the corporate people reading this to tell me I’m an idiot, but when Michael Arrington asks "Are you a pirate?" and Chris Dixon says there are two kinds of people in the world, I truly believe the direct responsibility to the bottom line is what makes entrepreneurs a different breed. Nothing separates the proverbial men from the boys like having to make hard choices about covering payroll or paying the past due rent.
This however, leads me to a disturbing trend that started with the original wave of venture funded dot-coms, but is now definitely making a comeback, the reemergence of entrepreneurs disconnected from the bottom line. 1999 was full of these types, but in the dark years of 2001-2007, companies were forced to actually make money to survive. Now with the return of flush investment capital has come the return of the “no-profits” founder.
Instead of launching businesses that actually have a revenue model, this type of entrepreneur often thinks that as long as their chosen metric (marketing data/user numbers/brand awareness etc.) is favorable then they’ve succeeded. Venture capitalists enable this kind of behavior by continuing to buy into companies with no foreseeable business model. If your startup is based solely on venture funding and not on a viable profit model, then for all reasonable purposes you’re thinking like a corporate buffoon.
I know there is a sizable list of companies that have scored big exits with no profits and someone always wins the Ponzi game, but it is still an unhealthy trend; a trend that I last saw right before the Valley imploded.
Having built several businesses on credit card debt, I find it baffling when I meet entrepreneurs who don’t worry about the bottom line. And yet when I talk to many of them these days, they sound a lot more like free spending corporate stooges than people trying to build an actual profitable business. When our entrepreneurs have grown as comfortable with wasting venture money as corporate managers are with wasting corporate cash, then they have essentially become the same breed.
[Illustration by Hallie Bateman]