Mar 242011

Size of Pie, a.k.a. What Type of Entrepreneur Are You?

Size of Pie, a.k.a. What Type of Entrepreneur Are You?

Mmmm…pie.  A post that Fred had up a few weeks ago about an M&A Case study involving WhatCounts, a company in the email space that I’ve known and had a lot of respect for for years, got me thinking about two different topics.  The first is thinking about types of entrepreneurs.  I’ve always said there were two types:  serial entrepreneurs who are great at starting companies but less great at scaling them, and entrepreneurs who are often part of a group of founders but who go on to continue to run the business for the long-haul.

CEO David Geller’s quote that gets to the heart of this in Fred’s post was:

…a bigger piece of a smaller pie, at some point, is the same as a smaller piece of a much larger pie.  And, donʼt let anyone tell you that baking a bigger pie isnʼt a whole lot more difficult.

Although David is talking about taking in outside capital and founder dilution in pursuit of larger business growth and objectives, he is also getting to the same point about entrepreneur type.  Scaling an organization beyond proof of concept, happy few customers, and profitable to be a $50-100mm business (and beyond) requires a whole different skill set than starting something from scratch and turning an idea into reality.

And in a sense, David is right.  Baking a larger pie can be a whole lot more difficult for some entrepreneurs if they are more of the serial entrepreneur type, or at least it can be far less interesting and fulfilling if what gets you out of bed in the morning is creating new things.  But for other entrepreneurs who are more of the “run the business” variety, getting out of the creation phase and into the scaling phase is more interesting and maybe even less difficult.  Even though businesses are never de-risked and a larger business with more employees just means there are more chips on the proverbial table, baking a larger pie and tending to the things that come with it – people issues, innovating within a platform, solving customer problems – can be less daunting than creation for some entrepreneurs.  (Return Path is in its twelfth year – can you guess which kind I am?)

So David’s right in terms of his core point about founder equity value and how large a slice of how large a pie the founder ends up with.  But whether baking a larger pie is easier or harder is less about an inherent difficulty in pie-making and more about the type of entrepreneur involved.

I’ll cover my second reaction to Fred/David’s post next week.

 

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