This “parallel entrepreneur” idea has been around since at least the days of Thomas Edison, and for the new generation of entrepreneurs, who have been multi-tasking since birth, it’s probably not even a stretch.
Some entrepreneurs, like Paul Graham of Y Combinator, and Dave McClure of 500 Startups, mask their focus on multiple start-ups by running an incubator or accelerator, and providing seed funding for a number of individual efforts.
They skip from one to the next, providing expert guidance and money, getting their satisfaction (and reward) from the best of the best.
For entrepreneurs who really try to be the CEO of multiple early-stage start-ups concurrently, the hot new term for this practice is “multi-table” entrepreneurs. I suspect this term is derived from the common online gambling practice of playing multiple poker games at the same time.
In fact, I think that’s a great analogy, since the odds in a poker game may be similar to those of a start-up.
Yet there are clear advantages to the parallel approach, if you have the moxie, resources, energy bandwidth and the ability to multi-task effectively:
1. A portfolio approach vs. all eggs in one basket. Investors have long argued the value of a portfolio to hedge and leverage the risk, so why shouldn’t entrepreneurs do the same? With the current low capital requirements for smartphone and Internet apps, and high market volatility, it makes sense to spread the risk around as much as possible.
2. Optimise your advisers and investors. Advisors and mentors are busy people. In your weekly meetings, it’s as easy to cover multiple company issues as one. Investors building their portfolio love to hear about multiple start-ups in one sitting, to select the best fit. Investors look at the people first anyway, so a strong team is good common ground.
3. Many entrepreneurs love investing in other start-ups. Most angel investors I know have previously founded and run at least one start-up. Both these roles require unique skills, but both can benefit from operating in the other mode. Multi-table investors are the norm, and the investment process is good training for multi-table entrepreneurs.
4. Learn to manage resources like multi-divisional corporations. Allocating resources – financial and operational – between divisions has long been a strategy for conglomerates and can work just as well for savvy entrepreneurs. Revenue from one start-up can be “invested” in another, and assets like buildings and computers can be shared.
5. Attract and share specialised talent and skills. It’s very hard to attract talented people to a single product start-up, but much easier if the entrepreneur has a bigger vision, with several entities producing complementary products. Expensive, “lean-start-up” specialists can see a career potential, work fulltime, and drive multiple successes.
6. Cross-fertilisation from current market feedback. One thing that you learn in one company, at a given moment in time, is equally valuable or leveragable in a different way at your other companies. As your customer list grows in one, you own it for the second. The cost of finding new markets can now be split among multiple entities.
7. Foster and enforce the art of delegation. For long-term success, every entrepreneur needs to know when to step in, and when to delegate. That’s a skill that may not get enough attention until too late. With parallel start-ups, delegation is a requirement for entry, and a valuable skill for all environments.
8. Multiply the pay back. Many parallel entrepreneurs have already achieved financial security through earlier efforts. Now they may see a way to multiply pay-back and spread the risk by active involvement with multiple start-ups. Of course, it’s like doubling down in gambling, which is inherently risky, as you might end up doubling your losses.
9. Products need not be tied to a given company. With open-source tools and public APIs, few products are created in a vacuum. The company entity is now primarily used to allocate ownership, accountability and tax consideration, and need not be bound to a given product or operational structure.
10. Burns off high energy and bandwidth. Now we are back to the fact that there are people who love to multi-task, and anything less is simply boring. This is especially true of Gen-Y entrepreneurs, with fire in the belly to change the world. Some see start-ups as a lottery where more tickets mean a higher probability of winning.
Of course, there are huge risks when you try to ride multiple horses at one time. At the very least, you may not do either well, or won’t be fully there when the going gets tough. Even single entrepreneurs who maintain a day job, for a steady paycheque, feel the pain of juggling multiple initiatives.
The hard part is getting the management part right. Every start-up has to have someone minding the store, and a clear path to “the buck stops here.”
No one can be a full-time CEO and work “in” the business of multiple companies. Plus there is the challenge of making sure the multiple roles do not conflict, legally or otherwise. Tread carefully there.
The most common way people move into the parallel entrepreneur environment, if they are so inclined, is to start another business, while still running the current one. The risk here is that starting something new consumes more energy than anyone predicts.
Overall, for the first-time entrepreneur, my sense is that trying to focus on more than one equally exciting idea is a recipe for failure. But with the cost of entry going down, and the multi-tasking bandwidth of each new generation going up, I suspect parallel entrepreneurs may soon be the norm rather than the exception.