Thursday, 28 July 2016

The Introvert Entrepreneur

Karl Gustav Jung coined the terms introvert and extravert to represent the two extremes of human nature with regard to sociability. An extravert cannot live without other people, is generally not shy, and socially very active. An introvert is the opposite: frequently shy they tend to concern themselves with things rather than people.  Other psychologists such as Hans Eysenck developed the concept and viewed this idea as a continuum on which any individual can be placed.

Most, but not all, engineers are introverted. The designers of the complicated world we use today, that permits us to communicate like this, are people who need to think deeply and intensively and focus on a design or concept over a long period of time. Naturally they tend to be introverts.

The people who market, publicize and sell these technologies tend to be extraverts. So clearly an enterprise needs extraverts and introverts. But what happens when you mix introverts and extraverts in an enterprise? Almost invariably the introverts get shafted.

If you consider Apple, Steve Wozniak thought everything up and created the products that Apple relied on; Steve Jobs decided what colour they should be. Steve Wozniak was so shy that he could not bring himself to speak at the initial computer club meetings from which Apple grew – he’s a classic introvert. Steve Jobs, of course, was the opposite. Who became the hero?

The world of the entrepreneurship industry, rather than entrepreneurs themselves, is stuffed full of extraverts. Like the law, the profession of choice for the cleverest extraverts, they have constructed complicated sets of totally arbitrary rules and structures with mysterious phrases like “mezzanine funding” and try very hard to persuade entrepreneurs that this structure has to be followed. This guarantees them the two things they crave: lots of people to show off to, and money.

One of the indicators of an extravert entrepreneur is how they pitch their idea. Invariably they will talk about the great people they have got interested, the ex this in Google, the ex that in IBM and so on. Getting together a great set of people is a recipe for a great party, not an enterprise. Similarly, the strange idea of “mentorship” from the great and good is a way of obtaining social cachet, not a product anyone would want to buy.

Introverts, the people who create the real value on which all this fluff feeds, are often baffled and bullied by the extraverts. The extraverts are frequently oblivious to the very existence of an introvert world view, and think it natural and right that the most socially connected should reap most of the rewards.

 But entrepreneurship is fundamentally about one thing: constructing something that people want and selling it to them; specifically doing this for the first time.

The success of this process is determined by flair and inventiveness, but also by hard numbers, by creating profit.

The extravert model of entrepreneurship relies on social contact; getting people to fund you based on your charm and the collection of allies you have assembled. Profit is not so important and is frequently delayed, often indefinitely…

The introvert model is different. The key idea is self-funding; of finding a way to bootstrap an enterprise without relying on the extraverts.

Many of the worlds big name companies followed this introvert model. Microsoft was profitable almost from the beginning, as was Apple.

Yet, in those places that entrepreneurship is taught, in the accelerators and incubators that the extravert world has created, the idea of self-funding is seldom discussed. Once you have investors their main concern will not be to share profits generated by trade but to sell their shares at a gain to yet more investors.

Just like it is impossible to be a little bit pregnant, you also cannot be a little bit venture-capitalized. Once you’ve found your angel investor you will remain on the treadmill ‘til your enterprise fails, or your ownership gets so diluted you become a de-facto employee.

Having investors also changes the definition of failure. An enterprise in a niche market that happily generates enough profit to keep a family fed will not satisfy an investor.

So how do you create an introverted enterprise?

By turning the extravert’s rules on their heads.

There’s no ‘I’ in ‘team’, that’s why you don’t need them. Do it all yourself and use technology to help you. When you reach the point where you can no longer cope then employ people only on a contract basis through their own companies. Never offer shares to anyone.

When it comes to creating the product or service to sell if this needs plant/machinery/premises you will have to fund this yourself or borrow. There are many enterprises that need no investment. If you can code, for instance, then you can build very complicated business offerings without any investment other than time. With the advent of cloud computing there is no argument for buying servers and plumbing internet connectivity. You can hire it all very cheaply. You can support an enterprise online at a cost in the low hundreds of dollars per month.

You don’t need a book keeper or accountant, use a service like Freshbooks. You don’t initially need a support team, use a service like Zendesk and outsource support once you can’t cope.

Finally, there is the role of government in all this.  Governments are like hyper extraverts. There are no more extravert people than politicians, except perhaps actors. Governments often hand out grants. These can be extremely hard to get, and what gets funded is determined by what the extravert politicians think is fashionable, box ticked by the most introvert and picky civil servants. To have a hope of a grant you must set up your enterprise to accord with their view of a model company. This is coloured by the extravert view of entrepreneurship. Nine out of ten applicants don’t get funding, but all get saddled with what may be inappropriate company structures.

When choosing the domicile of your enterprise don’t just assume that it must be a company registered where you live, or a company at all, for that matter. If you are not looking for investors you don’t need a company with shares. Since we have a world market for products, we also have a world market for company domiciles. Countries such as Lithuania offer a complete package, as do places like Delaware or various islands around the world. The key thing is that you understand the legal implications and can open a bank account for that domicile and connect up PayPal or whatever transaction handler you choose.

The last question is the one that will probably never arise – my company is very profitable, but I want to retire/start another/sail around the world, what do I do?

If you’ve constructed an extravert, venture capitalized company then that will be decided for you. Your initial investors will already have sold out and the next bunch will try to float you on the markets giving you the chance of a pay-out if you’ve retained any shares.  

The introvert company looks very different and can’t be floated without massive changes to the structure. The introvert company should look for a trade sale. 

In the software world the large companies like Google and Microsoft, and many mid-size companies, are continually hoovering up start-ups and small companies. What they are looking for is technology first, and user lists second. They don’t want your company, they don’t want a team, they don’t need any more sales people, accountants, managers etc. All those things the venture-capital industry find attractive are useless to them, they’ve got them already. They probably don’t even want you. Once you’ve handed over your technology and some bright kids have picked it apart even you are surplus to requirements. At that point take the money and be happy. In all the other markets there are analogues of this, in pharma you sell the IP and the process, in retail you sell the shops/website as a going concern. In each case the management becomes mostly redundant at the moment of sale.

The distillation of this message is that if you’re a social person, great, the system is set up for you and you can merrily network your way to success, assuming you can get an introvert to create one of those pesky products for you.  If you are one of those introverts who doesn’t want to be a host organism for an extravert, you must either learn to pretend or think laterally and create structures that suit you and your way of doing things. Success is never guaranteed, but entirely possible.

Andy Edmonds, PhD

Copyright © 2016 Dr Andy’s IP Ltd, all rights reserved

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