Planning, Startups, Stories


Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

Do Investors Make Good Entrepreneurs? 1

Interesting thought: lots of entrepreneurs end up as investors. Few investors end up as entrepreneurs. Does that surprise you? Do investors make good entrepreneurs? Hint: it’s a trick question.

This is the gist of what Charlie O’Donnell is saying in Everything I didn’t learn about startups as a VC (…or why VCs don’t make good entrepreneurs) on his blog.

He starts with this refreshing summary:

Many entrepreneurs turned VCs wind up going back, but to start out on the investment side and then successfully launch a company seems to happen much less frequently. … In fact, I don’t really know anyone who has successfully gone the other way.

For the record, I do know some counter examples to Charlie’s thesis, several people who went to VC firms as analysts after business school and ended up moving from there to startups. Usually that’s in a few steps: from VC employee, to management in a startup funded by VC, to a new startup. Charlie also recognizes “there are exceptions to everything,” but he makes a good case for a general rule. I’m not sure, myself, but it’s an interesting discussion.

So why is it a trick question?

Of the various reasons he lists, comparing and contrasting VCs and entrepreneurs, my favorite is this one:

VCs can afford to wait to make decisions most of the time—looking for a little more data, a little more traction… but entrepreneurs are on the clock. Funding is running low, competitors iterating. You often have to make decisions as an entrepreneur without the luxury of getting to wait.

And my second favorite:

VCs plan out the future of a company and what it needs—and are basically willing to support it if you continue to execute. The financing plans are largely in their court, whereas, as an entrepreneur, you deal with what you have and you always have the uncertainty of a future financing affecting your plans.

He makes several other interesting comparisons. Focus on star top management vs. focus on stars in the trenches. Focus on product management. It’s a good read, and an interesting discussion.

It’s a trick question because it’s assuming any specific career prepares anybody for some other career. Maybe, but maybe not, it depends on the case. Do managers make good entrepreneurs? Business professionals? Consultants? Accountants? For that matter, do former entrepreneurs make good entrepreneurs?

(Image: David Everson/Shutterstock)

  • http://www.cubert.net Charles Robinson

    I don’t know any investors so I don’t have a direct comparison. Out of the entrepreneurs I know the only similarity I can find is a passion for excellence.

    My dad only had a third grade education and built his electrical contracting business to be one of the most highly regarded in a tri-county area. His number one priority was ensuring he did the best job he could, with the idea that the customers would follow. They did.

    One of his best clients was an entrepreneur named Pal Barger. Pal would go around every house my dad wired with a level, ensuring all the switch plates were lined up exactly. Pal’s eponymous fast food chain is the only restaurant to ever have won the Baldrige National Quality Award.

    The two men who started the company where I work now both have MBA’s and their company motto is “Customer service beyond all expectations.” They deliver that and reap the rewards.