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Financial Times: What’s wrong with the right entrepreneurs

By Luke Johnson
Published: March 19 2008 02:00 | Last updated: March 19 2008 02:00

I enjoy what I do partly because I like working with entrepreneurs. They tend to be inspirational, energetic individuals, fizzing with ideas and optimism. But like most of us, they have their flaws. If you want to succeed in backing them, it pays to look out for the drawbacks and come up with solutions to compensate.

Entrepreneurs often have low boredom thresholds and are weak at the day-to-day micromanagement that every business needs. Mostly these visionaries focus on the big picture – they find administration dull. The wise founder hires a detail person, someone who enjoys process and paperwork, to clear up after them and keep the systems ticking over – be it finance, legal or technical matters. Frequently, business owners have extraordinary passion about their enterprise, and can carry a team to hell and back with their persistence. But that charisma and audacity may well be accompanied by an ability to overlook tedious but vital subjects such as bank covenants, contractual obligations and cash generation. That is where the reliable partner comes in, taking care of the housekeeping, and preventing the chaos that can overwhelm so many creative personalities.

Many entrepreneurs I have backed have been workaholics. The prolific inventor Thomas Edison said: “If my life had been made up of eight-hour days I do not believe I could have accomplished a great deal.” He regularly slept overnight in his laboratory, even after he had achieved much. Such industry partly accounts for the high rate of divorce among the self-employed, and the frequently strained relations with their children. They are not great at switching off from work, and the stress takes its toll. Balance is not really part of the make-up. Yet they are rarely depressives. As a breed they tend to subscribe to Teddy Roosevelt’s view: “Far and away the best prize that life offers is the chance to work hard at work worth doing.”

Delegation is a skill that comes reluctantly to many leaders. They always feel they know best, and interfere with subordinates just trying to fulfil their appointed task. Those who evolve and develop large concerns are the ones who know how to recruit and motivate expert staff – and then let them do their job. For creators, it can be like letting go of your children, but such enlightenment is a necessary step if a business is to expand beyond a corner shop.

Almost all people who start a business are relentless optimists. They believe profoundly in the future. As Henri Deterding, the “Napoleon of Oil” and co-founder of Royal Dutch Shell, said: “The future belongs to those who are virile, to whom it is a pleasure to live, to create, to whet their intelligence on that of others.” This vein of positive thinking can sometimes stray into dangerous territory – foolish risks, a denial of reality, persistence beyond common sense. And history shows that emperors who surround themselves with yes men have no one to bring them to their senses when they overreach, and so ultimately they are toppled.

A weakness of many entrepreneurs is that they have just too many ideas. They cannot stick at one thing and make it great – they get distracted and rush off to conquer other worlds. Their intelligence is the sort that dreams of endless possibilities – but follow-through is not always their strong suit. Again, the answer must be to surround the central genius with men and women of application who repeat the formula rather than invent it. The true pioneers at PizzaExpress, Henry J Beans, Patisserie Valerie, and Belgo all devised brilliant venues but tired of opening more branches. In each case, I simply took their concept and helped replicate it.

Ours has been an age of financiers, but perhaps this great period of leverage is drawing to a close. The investment bankers, hedge fund managers and – God forbid – private equity houses are no longer in the ascendant. Now the field is more open to those who actually run things.

I feel confident that the inventors, the makers and the builders will mostly maintain their momentum, in spite of their quirks and shortcomings. The clever ones will surround themselves with able supporters to balance out those imperfections.

Copyright The Financial Times Limited 2008

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