We Need More Founders

Entrepreneurship is essential to our survival and success. (#72)

I believe we need more founders and entrepreneurs.

They don’t all have to start venture-scalable companies hellbent on raising venture capital. VC isn’t suitable for most businesses. That’s totally fine. When I say “we need more founders” I mean we need more people building all kinds of businesses.

Some data for you:

• Small businesses generate nearly half of all economic activity in the U.S.¹

• Small businesses created two-thirds of all new jobs in the U.S. over the last 25 years, far outpacing the job creation by larger firms.

• In the U.S. small businesses employ 46.4% of the private sector workforce.²

• In Canada, small businesses employ ~70% of the total private labor force and account for 30% of the country’s GDP.³

• We’ll see an unprecedented number of small business owners retire in the next 10 years, and many do not have a transition plan (so you could buy a business!)⁴

Small businesses (< 500 employees) matter. A lot. They employ a ton of people, drive tons of economic value and generate wealth.

We need more entrepreneurs.

The folks at Shopify agree. In fact, their entire business was started and scaled on the premise that they could make it so easy for people to start an e-commerce store that it would grow the market. And it did.

Not everyone agrees.

I get Startup Shinobi’s perspective. Starting a business is risky. You can easily over-extend yourself, lose lots of money and put yourself (and your family) into a serious hole. But if too few people try, we’ll see too few good ideas and create too little value + wealth going forward. That should scare everyone.

Ambition and Courage

Recently, I saw Tobi Lutke, Shopify’s founder & CEO present. One of his key messages: founders need more ambition & courage. He was speaking about Canadian founders, but it applies everywhere. Starting a business requires enormous amounts of ambition and courage. You have to want to win. I don’t care what type of business you’re building.

Building something from nothing is so incredibly difficult that the only way to sustain yourself is through internal belief. All entrepreneurs surround themselves with a “reality distortion field” to survive the journey.

I’m fascinated when founders decide to jump off the proverbial cliff and start businesses. I always ask, “Of all the things you could be doing, why this?”

The answer isn’t always super compelling. Not everyone starts a business for the right reasons, but instead gets caught in the hype, sees their peers doing it, or thinks it’s a “get rich quick” scheme. These are classic StartupLand traps, fuelled by the media, gigantic funding rounds and unicorn chasing.

A lot of entrepreneurs will fail. But if you’re not inspired by those willing to try, you’re dead inside.

I ❤️ founders.

Some are batshit crazy. Some do bad things. Some aren’t very good at it. All true. That’s the case in any profession. But without entrepreneurs, most of what we buy, use and benefit from wouldn’t exist. What the hell would that world look like?

Trial by Fire

Being a founder is hard. Everyone understands that but too often we celebrate the wrong things, including:

• Fundraising

• # of Employees

• Awards / Media

Fundraising is not winning

The hype around fundraising does more harm than good. It’s created a belief, amongst a small, but vocal tech community, that raising venture capital is the only way to win. It’s not.

We celebrate fundraising rounds as if we’ve won something significant—and I get it. Fundraising is hard (for most of us) and when we finally close a round we want to scream from the rooftops. We share the news and the tech community celebrates.

• Raising capital is not winning.

• Raising capital is a tool that gives you a chance of winning.

As soon as you raise venture capital you’re playing a very specific game. There’s no more bootstrapping, or “getting to profitability” and making people happy—it’s now all about scale and being an outlier. To be clear, getting to profitability can be a positive step, but many VCs will worry that you’re building a “small business” instead of shooting for the stars.

“Burn baby burn!” is something VCs have literally said (over and over) when money is free-flowing and valuations are skyrocketing. When things go the other way (and they always do; it’s called a “cycle” for a reason), VCs change their tune quickly, and encourage you to cut costs (the money you raised almost certainly led to over-spending), but ultimately, not at the expense of building a unicorn. There’s an inherent tension there that destroys startups.

I completely appreciate why people celebrate fundraising. Go for it. 🎉 But then get back to work and do your best to avoid the hype.

Adding lots of employees is not winning

People always ask: “How big is the team, now?”

Founder: “We’re 100 people. We’ve grown 100% in the last twenty minutes.”

People then say: “Wow, that’s amazing. You guys are crushing it.”

Founder: “Ya…” (translated: “I think we hired too many people, we’ve lost control, everything has slowed down and we’re burning huge piles of money every month.”)

I hate talking about and celebrating employee counts.

It’s one of the worst vanity metrics of all time. We’ve been trained to believe that bigger teams are better. It’s nonsense. Bigger teams come with a ton of challenges. A lot of startups collapse under the weight of their growing teams and never recover.

It’s ironic that two of the things we tend to celebrate—fundraising and team growth—create the conditions for startup failure.

Of course, some teams have to grow, and some companies have to add lots of employees. But I don’t think it’s worth celebrating.

Hype is not winning

Media buzz. Startup awards. Social media attention. These things are fun. They can help you attract talent (but do you need that many people?), investors (but do you need VC?) and other interesting opportunities. But chasing hype is dangerous. You need some hype (if no one knows you exist, you’re in trouble), but prioritizing it over building real value for customers is a death trap.

I feel the same way about events.

There are good and bad events. Attending some events is worthwhile, but if you’re spending more time at events than you are solving customer/user problems, you’re in trouble.

Alexis Ohanian, founder of Reddit, reflected on his experience:

I like Shruti’s perspective — most events aren’t useful, but if you want to get value, prepare in advance:

The event debate will rage on. Should you or shouldn’t you go? Ultimately it’s up to you, but it’s a question of prioritization and being clear why you’re attending something and how you’ll measure success (or failure).

Spotting Great Founders in the Wild

Founders come in all shapes and sizes. From all socio-economic backgrounds. Globally. Some founders definitely have access to more resources—privilege is a thing. But in the end, founders are everywhere.

Finding them is still tough.

Most people, including top tier investors, do not have a magical, full proof ability to detect founders, especially first-timers. If investors were better at this, their track record would be better. It wouldn’t take a founder 100+ pitches and rejections to raise capital.

I know a lot of investors that quickly dismiss people, “She’s not a real founder.” These investors are pattern-matching from whatever past success they’ve had, and stereotyping “great and crappy founders” as a result. I call bullshit.

Who am I (or anyone else) to tell someone, “You don’t have what it takes.” How many great founders (of all types of businesses) would have given up if they listened to the naysayers?

I’ve met lots of people who I felt didn’t have what it takes. Enough of them proved me wrong (sometimes on a second or third startup after failing) to realize that I should be careful about judging too quickly. It’s easy to be dismissive. It’s much harder to believe. I choose to believe in founders. Not because most of them will succeed (they won’t, the startup failure rate is high), but because we need more founders, spotting the best ones is tough, and I don’t know what the hell I’m talking about. 🤣

Support Entrepreneurship

We need more people supporting entrepreneurship (of all kinds), from grassroots, community initiatives to governments. For a startup ecosystem to succeed all the puzzle pieces have to fall into place.

Everything starts with founders, but they can’t do it alone. No one wins on their own. They need:

• Shoulders to lean/cry on (been there, done that; as the leaner/cryer and the shoulder)

• Schools to introduce & teach entrepreneurship (from high school to university)

• Community (physical spaces, founder groups, events, etc.)

• Different types of capital (including angels, VCs, grants, fair loans, credit lines, etc.)

• Talent (from universities/colleges, big companies, other startups, remote, etc.)

• Programs (accelerators, incubators, etc.); although I appreciate that many of these aren’t great (and some are predatory)

• Mentors (not people who take 2% equity as a startup advisor and do f-ck all)

• Coaches (founders: find a coach/therapist)

• Customers (especially local ones to kickstart things)

• Acquirers (ideally local / regional ones, so the talent + wealth stay in the ecosystem)

• Less friction from policies / systems

• Etc.

If you can help an entrepreneur, you should. Entrepreneurs solve many of the problems we face. They create jobs and wealth. They drive the global economic engine. These are all good things. 💪

A world with fewer founders isn’t going to win.

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1. https://www.businessnewsdaily.com/1298-small-business-good-for-economy.html

2. https://advocacy.sba.gov/2023/03/07/frequently-asked-questions-about-small-business-2023/

3. https://www.forbes.com/advisor/business/small-business-statistics/

4. https://www.bakertilly.com/insights/are-you-prepared-to-transition-your-family-business