A few years ago I was fortunate enough, to be part of a new entrepreneurship education program called CEED Top Class. We were the first generation of "students" and the criteria to get on board were quite high. I remember we had to have at least 5 employees, 200k revenue and be in business for at least 3 years. All this just to make sure that all 25 of us were on the same level of experience.
One of the main focuses of the education program was to understand Venture Capital ( VC ) and to help us bring our business to the next level. During the first year of Top Class, I managed to understand what were the positive and negative sides of Venture Capital and at that time I drew the conclusion that we really didn't need, or even want a VC investment. At that time we were running a successful web design business, what was seen from the point of view of a VC investor as a lifestyle business. This means that we were not interesting enough for a VC, even if we wanted to seek an investment.
Me and Igor ( my business partner ) had quite a lot of beerstorming™ those days about how to grow our business. Should we try to do it with our own resources or should we find a strategic partner, maybe we should look for a VC, or an angel investor may do? We knew that the web design business is not very interesting for investors, but we had a unique idea and some cool proofs of concept.
Our idea was to develop a separate business based on a suit of web applications for enterprise users and we knew we would need an investor to finish the development of our applications. This was in 2008 and we even managed to find an angel investor who believed in our idea. Unfortunately in 2009 the global recession brought our investor-to-be to his knees and our investment idea was over even before it even took off.
This was a hard hit for us, because we already started the development and had assembled a good team. We also learned a very precious lesson - you don't have an investment until the money is on your bank account.
Are we developing a lifestyle business?
So here we are now 4 years later, our idea is still very valid, maybe more now than ever. I happen to know quite a few people in the local VC community and I discussed various venture ideas with them quite often. A lot of times we were discussing great companies, with solid cash flow and growth potential, but as soon as they saw only 1 owner who lives and breathes with his company, his business is labeled as a lifestyle business.
|photo by: Giorgio Montersino|
But how is this different from the affection to their companies of people like Steve Jobs, Page and Brin or Tony Heish, just no name a few, to their companies. Are they not investable because they ARE the company? They live and breathe their business and it is almost impossible to associate them with any other activity. Bill Gates runs several businesses and even a charitable organization, but for the world he is mr. Microsoft. Even Steve Jobs had previews businesses and he was quite successful at Pixar, but nobody refers to him as mr. Pixar.
So, if you happen to have a good business idea and start a new venture, should you treat it just as another business and keep a good distance from the business you are running. Or is it better to get intimate with the company and slowly become the company?
I believe that a good CEO should be in the front line of the company, he should be the one who sets the example for others to follow and he should be the one who represents the business. If you have a billion dollar idea, you should be the first who promotes this idea and you should be the one who lives with the business. No excuses, no false intentions. If you want your business to be really successful, I mean, REALLY SUCCESSFUL, it is up to you to create a lifestyle out of your business.
So I think that even if you are looking to get founded, you should still consider what your business idea means to you. One of the most desirable exit strategy is an IPO ( like the 5 billion $ Facebook just made ) and to reach this goal you need to work really hard for many, many years. This means that inevitably you business becomes your lifestyle. Just don't be to proud, don't think you can make it on your own, find help, find partners and the universe will help you out.
In Wikipedia a lifestyle business is defined as:
A lifestyle business is a business that is set up and run by its founders primarily with the aim of sustaining a particular level of income and no more; or to provide a foundation from which to enjoy a particular lifestyle.So even if your goal is to create a multi-billion dollar company you could still conduct a lifestyle business which is very lucrative four investors and very satisfying for you in the long term. Besides this, lifestyle businesses have a much lower failure rate and create great working environments for their employees and usually bring back something to the community as well.
Just a note to VCs, when considering your next investment, try to recognize the potential in the people that own a lifestyle business, big or small, they will do everything to make things work out just right. Will you get the same commitment from the ones who are just looking to cash out? I doubt.