Walland, Tennessee, 83 degrees, humid – Blackberry Farm.
This weekend I’m at the farm for our annual YPO retreat. YPO is a global platform for business entrepreneurs to engage, learn and grow. So far this weekend I’ve had some fascinating conversations with some extremely successful business leaders about their business models, their opportunities and their challenges. Some of the members operate in or around the hedge fund space and I’ve learned more about the hedge fund business in the last 48 hours than I have in the last 18 years.
Two things have been striking me in these conversations.
Just how much capital is actually available in the market. More than I can intellectualize. Broadly speaking, there is no lack of money.
How significant the need is for these resources to advance important objectives and how difficult it seems to get money to focus on solving some of the world’s biggest problems (hunger, drought, disease, conflict). Why?
First, I should say, I believe business is the solution to the world’s biggest problems because business is the only self-sustaining model we have that doesn’t rely on other things. For example, government needs taxes, not-for profits need donations. Where does that money come from? Business enterprise. So why then, with all this money in the world system, and all of these problems to be solved, does the gap seem so large?
The way I’m putting it together in my head is as follows. There are at least 3 macro pressure points that derail the connection between money and solving serious global problems. And hundreds of micro points in between. Think of money as the top of the funnel, looking for somewhere to go, where it can grow. And at the bottom of the funnel is an idea. And it probably needs money to advance. Let’s start at the bottom of the funnel with an idea and work up from there to see what happens. Someone has an idea to solve a problem, what next?
Idea to Business – Stage 1
That idea must be turned into a business to go anywhere. The issue here could be several things. Let’s assume the person is successful in launching a business with the idea. An early stage entrepreneur will likely struggle with capital and the business may die before it takes hold because the early entrepreneur struggles with getting enough people to pay for the idea fast enough to keep up with the cost of the business. Most businesses don’t survive this first stage. Issues here include basic business skills like cash flow management, time management, defining the value proposition, pricing the product or service, real estate cost management, etc.
Founder Business to Scale – Stage 2
For those who succeed in Stage 1, the next issue is moving the business from the founder orientation, which is often lifestyle drive, to something bigger. Does the entrepreneur’s vision hold water outside the founding demographic? Can the concept be scaled? Should it be scaled? Does the founder want to scale it? Issues here include energy (often the founder has been grinding for so long in phase 1, the idea of phase 2 is too much), motivation (why do it), capital (need more of it), systems (need some).
Scale to – well, BIG Scale – Stage 3
Let’s say the business repositions itself to receive outside capital – which is no easy task by the way. And the business does receive an investment, now an entirely new set of challenges arrive, including managing change of the company culture as the founder possibly exits, figuring out how to operate with a new boss (outside capital), dealing with public scrutiny that comes with a higher profile, etc.
Now, back to solving global problems. In most cases your business has to get to Stage 3 to solve a big problem because the biggest problems require large scalable, sustainable solutions. And it’s very hard to get to Stage 3, which is where most of the capital is interested in playing. Now you can see why it’s not easy to get the money to flow through to the idea and pull it up through the funnel. Different issues need to be overcome at each stage of the business. Different risks and opportunities present themselves in different areas of the funnel. So what do we do?
Let me put forth 3 ideas on this.
Technology innovation could solve some of this. Imagine if it was transparent and predictable where a business is and what they need right now. Privacy issues come into play when you think through this, though I’ll bet there are a lot of smart people working right now to aggregate the data of small and medium size businesses and business owners to know more precisely who to approach with what kind of offer to help them advance through the funnel with their idea and business.
Advance crowdfunding platforms. Only a handful of people in the world have billions. Though many people have $20, $100, or $1000 and if presented with a compelling, trusted investment to advance the solution to a major issue, they would do so. We have a good start on this, a quick search shows some options. We could do more to advance this idea, specific to major issues worth solving. https://www.godaddy.com/garage/top-20-crowdfunding-platforms/
Successful entrepreneurs can do more to advance other entrepreneurs. For the last several weeks I’ve been monitoring the online sphere of “inspiring entrepreneurs”. I will tell you so far, my experience is many of the people promoting in the space haven’t actually built or run businesses of any scale. They may be thinking entrepreneurially, but they have a limited track record. The real entrepreneurs are busy running the businesses. We need more entrepreneurs with a proven track record to come out and help and we need more people who think and speak entrepreneurially to go start a business, grow it for 10+ years, and share that experience to help others.
I’m issuing a challenge on this blog. To myself as well as other successful entrepreneurs who have built successful businesses. Raise your voice. Get out there. Find other entrepreneurs who need help. Use your network to advance ideas and business. There are enough resources and creativity to solve even the most entrenched problems. Let’s get going with that.