Saturday, October 20, 2012

Do veterans really make good entrepreneurs?

Life has a cyclic rhythm to it. Privates in basic training go through the same set of personal challenges every new class, officers go through similar challenges and questions when going through their initial military training, new O-1s face common uncertainty when checking into their first unit, and many military veterans at business school, year after predictable year, are always asking "should I try being an entrepreneur?"

Popular media suggests that veterans are ideally suited to be entrepreneurs. The Wall Street Journal, the Harvard Business Review, and many others promote the idea that veterans are a natural choice to be entrepreneurs. The argument is that those who led in the military are accustomed to managing risk, taking initiative, and possess the necessary "get it done" attitude to overcome the incredible challenge and uncertainty involved in running a start-up.

The above attributes are certainly true. However, one has to then consider why virtually no veterans become entrepreneurs after attending a top business school. Over 90% of veterans at top business schools talk about entrepreneurship in a positive way, but only fewer than 3% become entrepreneurs. Let's explore some possible reasons why.

Myth #1: "I don't have sufficient business experience to be an entrepreneur."

The founders of Apple, Microsoft, Dell, Facebook, and many of our favorite companies and brands had no business experience, and they certainly didn't have an MBA. In fact, the founders of the previously listed companies didn't even have an undergraduate degree. The myth is that you need a lot of business experience to start a company, but the reality is that very few established business leaders end up becoming incredibly successful entrepreneurs. They have too much to risk, too much to give up in their current job, have invested too much into their existing career, have kids/family to consider, and may already be fairly set in a certain way fo doing business.

An Army or Marine Lieutenant may receive perhaps 10 months training before being given 35+ men to lead in combat - making life and death decisions and leading from the front. Yet that same officer, with 4 more years of real-world experience, followed by 2 full years of training  at some of the top business schools in the world (twice the training he had in the military), somehow feels he is inadequate to start a business? If you look at the actual landscape of entrepreneurs with little to no business experience starting and growing today's successsful companies, that 29 year old with 5 years of military leadership and a top MBA is not deficient in experience. So let's put myth #1 to bed.

Myth #2: "I'll first do a couple of years of consulting or general management and then I'll be an even better entrepreneur."

This is a commonly romanticized idea that veterans at top business schools love to convince themselves of. Unfortunately, there is a major flaw with the logic, although as part of their recruitment push, consulting firms would have you believe otherwise. The easiest way to debunk this myth is with a simple analogy: Imagine an O-1 is just finishing up his initial training and comes to you and says "I've been offered a platoon (or equivalent) leadership position - but I'm going to pass on it and work at the Pentagon for three years first. I'll learn all the ins and outs of the big picture at the Pentagon, and then I'll come back and be an even better platoon leader!"

The above idea is of course absurd. Working in the Pentagon on your first tour won't make you a better junior military leader - if anything - it will make you worse. You'll get soft, become out of touch, master powerpoint and getting coffee, and return to your unit tactically deficient and with mismatched skill sets. Working at the Pentagon will help you become a better person who... works at the Pentagon. Similarly, working in General Management in a Fortune 500 company, or as a consultant, gets you ready to be a more senior consultant or a more senior General Manager - not an entrepreneur. The experience may be equally valuable, and I don't mean to pass judgment on what is better, but one should be honest with himself about what he is actually setting himself up to do and be.

Myth #3: "I just don't have any good ideas to start a business."

I've got some free ideas for you... start a better search engine, sell PCs for less than other people, create a platform to send text messages to lots of people at once, or one that let's college kids post their picture online and communicate. What the hell am I talking about? Well, of course that is how Google, Dell, Twitter, and Facebook got started, and their ideas seemed just as crazy and unconvincing when they were conceived as they may be today.

Still don't see my point? I'll give you some more business ideas: Online purchasing of reading glasses, another online photo sharing site, internet footwear sales in Europe, online trading of children's used clothes, a site to book handymen to come and do your household chores. Are you excited to run out and create one of those businesses, or are you thinking "what is he talking about? Those are not great ideas at all. They would never be funded." Well - they are real examples of recently funded startups by Highland Capital, one of the most successful and prominent venture capital firms in the world (see more investments here).

My point is that businesses rarely (if ever) start with the same idea they eventually evolve into. It's only in hindsight, after many years of work and successful execution that one looks back and says "now that was a great business idea!" I'm not saying some idea is not important, but it's a small part of the equation. More important is what space you will be starting the business in (do you have the right business trends backing your industry?), and how well can you execute on a plan. Think of it like this:
  • Business idea = written order / patrol order
  • Business environment = enemy situation
  • Business team = unit leadership
Give the best military leader a terrible patrol order, and he will always outperform a terrible military leader with a great patrol order.  Furthermore, throw somebody into an impossible enemy situation, and it won't matter as much whether he's a great leader or not - you can't win a battle when outnumbered 1000 to 1.

Through all my lessons, discussions, and experiences, I would place the following as criteria evaluating potential success for a business:
  • Business idea = 10%
  • Business environment = 40%
  • Business team = 50%
The right team will be dynamic, iterate, pivot, change, and overcome challenges. There is no such thing as a bullet-proof business idea. If it is so amazing, somebody else would have almost certainly have thought of it by now. Much more important is a team (or individual) who can adapt, identify opportunities, properly execute, and has the opportunity to take that first step. That said, if the business environment is terrible (industry is going in wrong direction), there is not much he can do. An example is if you started mobile music streaming to cell phones in 2003 - you just wouldn't be successful - no matter how great you were. The industry just wasn't ready for you yet, and you were ahead of your time. Many early companies failed trying this, but others with lesser business plans succeeded after smartphone adoption grew exponentially. That is what I mean by business environment.

So while you can't start a business with a stupid idea, it is a myth that you need to wait until you have some Einstein-moment and figure out an incredible idea. Just look at the investments of all the top Venture Capital firms and you'll see that at least on the non-high tech side, ideas are cheap. Execution is everything. You already know this from your military experience.

In conclusion...

There are many reasons to become or not to become an entrepreneur. I do not mean to suggest that entrepreneurship is the "right" path for you or for anyone else. There are many ways one can be fulfilled and create a great impact in this world that has nothing to do with entrepreneurship. Many military personnel at b-schools, however, are highly attracted to the idea of entrepreneurship because it allows them to exert autonomy, control, and decision making authority right away - all things they have sought their entire career. However, few will take up the calling.

While the three myths I highlighted above are the most commonly cited reasons, I think there is something deeper. Ironically, and unfortunately, a lot of military personnel simply lack the confidence to venture out on their own. They've been used to having job security, a well laid out and clearly understood career timetable, and a direct work environment which tells them what they are doing right and what they are doing wrong. Entrepreneurship doesn't have any of that.

As a military veteran, you have definitely faced great challenges in life and have already accomplished more than the vast majority of your peers. Most of you will eventually decide that your personality and skill sets are better aligned with non-entrepreneurial ventures - and that's great. However, if being an entrepreneur is your calling, have the confidence to follow it.