When Should an Entrepreneur Quit?
— by Charlie Paparelli
“I actually think he has too much perseverance,” my friend Mark, a fellow angel investor, commented.
I was asking about one of his investments. The entrepreneur who started the company is incredible. Smart, experienced, process-driven, hard-working, and, most importantly, market-focused. If anybody is going to be successful in getting a company out of the ground and to scale, it will be this guy.
But he isn’t, yet.
This “too much perseverance” comment began to haunt me. I couldn’t let it go. I kept asking myself these questions:
Is this a good virtue turned bad?
When should an entrepreneur quit?
Why do entrepreneurs keep going in the midst of what looks like a dead-end?
Didn’t I look for this virtue in the entrepreneurs I funded over the years?
What happens to the entrepreneur if the business just keeps going, but goes nowhere?
An entrepreneur, not an investor, gave me the answer.
I was talking to John Hanger, a serial entrepreneur friend of mine. He put this perseverance comment into perspective for me.
I was inviting John to be a guest on the Paparelli Zoom Chat for Entrepreneurs. I wanted him to talk about Car360. John approached the founder of Car360 and offered to help him focus on the automotive market. This is John’s sweet spot. John eventually joined as the CEO. Nine months later, the company sold to Carvana for $24mm. “What a great story!” I told him.
He told me what happened, and then he said, “That was just lucky. Great timing. I don’t think this is interesting. My prior company is a much better story. Talking about what happened there will be much more helpful for entrepreneurs.”
John started Contact at Once.
It was a company focused on, you guessed it, automotive. He said, “We sold the company for $71mm. It was an overnight success after 9 years.” John is from Montana so he talks like a cowboy. Understated, self-effacing, and matter of fact with a hint of sarcasm.
He had a unique product focused on solving a real problem. He had big projections. He raised money to achieve the projections. But it all didn’t happen just the way he and the investors thought it would happen. Early sales looked promising, but they didn’t take off. It was not a hot product everybody had to have. There were bumps, barriers, and battles.
I’m summarizing what happened at Contact at Once. We will get the details on November 4th at 9 am when John joins as my guest on the Zoom Chat. It is a great story with lots of great lessons for entrepreneurs. It is a story with a happy ending. But not all stories end this way. And every story has a darkest days segment.
So what did I learn from John on perseverance?
You are called by God to start a business.
Scientists cannot prove where an idea comes from. I believe the idea comes from God.
We are uniquely created by God for a purpose. Some of us are created to do God’s greatest work...creating. We call these people entrepreneurs. They get an idea. It will capture them. They must take action. They evangelize the idea and attract those early apostles/employees. Then they start a company to make the idea into a commercial market reality.
Entrepreneurs that experience this supernatural calling cannot and will not ever give up. They don’t have that choice. This is what they must do. This is their creation. They are called by God.
Raising money.
After the apostles join, then come the disciples...the investors. They are drawn to the entrepreneur, the vision to change the world, and the plan to do it. The investors want in.
This further commits the entrepreneur. The more people who follow, including the employees who dedicate their lives to the startup and the investors who dedicate their money, the more committed the entrepreneur. He or she is the center of this new dream. The entrepreneur’s dream and identity become fused as one.
Starting a business is the beginning of opportunity.
Market opportunities only come to people who are already in business. I’ve seen this in every startup I invested in. You must be in the right place at the right time to succeed. You can never plan to be in the right place at the right time. To have any chance of being in the right place at the right time, you must be in business.
The darkest of days turn into the brightest of days overnight. I’ve experienced this in my startup in the late 1970s. I’ve experienced it countless times as an investor. Just when you think all is lost, an opportunity appears that fuels the hope.
Entrepreneurs know the opportunity will come.
It will happen to them. They know because it is how God made them. They have a hope against hope view of their world that other people who are not entrepreneurs simply don’t have.
And here is the lesson I learned from thinking about my fellow angel investor’s comment: Perseverance is in every entrepreneur’s DNA. We investors will never understand it.