Etienne Krieger shares two important insights for entrepreneurs: for starting up, for scaling up an enterprise
The quest for financial returns can sometimes turn normal individuals into greedy fiends lacking humanity and empathy. Fortunately, as surveys of the motivations of entrepreneurs invariably show, most entrepreneurs are not primarily driven by money. Self-fulfilment and freedom always come first in these polls, where financial enrichment is at best only in third place.
Co-founder and former CEO of PriceMinister, a start-up founded in 2000 and acquired after ten years by Japanese group Rakuten, Pierre Kosciusko-Morizet used to say that “when it comes to money, people’s true nature is revealed.” Entrepreneurs are not the only ones this maxim relates to but, facing the tyranny of cash flows and pressure from unsympathetic investors, they are on the front line. Paradoxically, it not usually modest shareholders who are the most rapacious. Time and again it has been found that wealthy people are more concerned about money than Narcissus was by his own reflection. Even in the case of a sale providing a comfortable capital gain, you can find a partner or a business angel seeking to negotiate special benefits. Better then stay cool and be able to refuse such blackmail.
So, money often makes people act irrationally. The poet Horace, author of the injunction ‘Carpe diem’, questioned whether money was ‘servant or master’. In his preface to La Dame aux Camélias, Alexandre Dumas Junior concurs, writing "Do not esteem money any more nor less than it is worth: it is a good servant and a bad master." Often, freed from cash-flow worries, the creators of tech companies are increasingly eager and to have a social and environmental impact in order to create truly sustainable value. This requires wise investors but also patient ones, because the financing of innovation is the antithesis of high-frequency trading.
The growth of impact investing and hybrid financing is very encouraging because it is an ode to the thoughtful and patient use of capital – using money as a lever to improve the world and not as an end in itself. This is a way to reconcile Horace, Alexandre Dumas Jnr., and all those entrepreneurs who aspire to change the world by integrating financial logic and real value creation: the value that does not require a safe to store it in and which, like knowledge, multiplies as one shares it.
The leaders of successful growth companies tend to be outstanding strategists who are masters in the art of delegation, motivation and financial steering. Learning from their experience, these are five main pitfalls entrepreneurs need to avoid:
1. Recruiting profiles that are unlikely create growth
Do not compromise on the need to attract talent – and keep it. Most of successful leaders spend a considerable amount of time ‘recruiting stronger profiles’.
2. Do not train your teams in the professions of tomorrow
In a hyper-growth business, the job of a leader will change radically every year and this will be the same for a large number of his or her colleagues. So, training and mentoring/coaching schemes are often needed to support these changes.
3. Over forcing commercial growth
We must choose our battles, both strategically and commercially. A growth company should not proceed with rapid geographic expansion and at the same time initiate upstream and/or downstream integration, technology-related diversification, customer diversification, or development of new know-how. Scaling up should be planned over time to avoid the real risk of energy dissipation.
4. Failing to anticipate the need for financial resources
The management controls need to be highly professional and must allow the precise evaluation of the cash flows generated by the operation. Never ignore the management of the generation and consumption of cash.
5. Losing the entrepreneurial dynamic
Harmony amongst the founders, staying close to the team and promotion of original employees are part of the motto of entrepreneurs who have been able to successfully transform a small team enterprise into an industrial or service group, while retaining the pioneering spirit that motivated their entrepreneurial adventure. When we question the leaders of such companies, what is striking is their humility (undoubtedly the essence of their leadership) and their desire that praise for success is equitably shared – the absolute opposite of the arrogant self-importance often associated with successful people.