The Parallel Entrepreneur

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You hear about serial entrepreneurs all the time, people who start company after company. We love to back people like that and have done that five times already in our current fund.

But what about the parallel entrepreneur? The person who can't do one thing at a time. They need to do multiple startups at the same time.

The best example of this is Bill Gross and his incubator Idealab. There is a good piece on Bill in yesterday's New York Times (sub req'd uggh).

It's a good story. Bill decides to be a parallel entrepreneur, forms Idealab, the Internet happens, he starts dozens of companies in parallel, the market goes nuts, he decides to take Idealab public, the market breaks, he's down to his last $50mm, he steps on the breaks hard, he's sued by his investors, but he hangs in there, focuses intently on a solar energy startup, gets his mojo back, and Idealab is now thriving again.

I admire Bill Gross for his creativity, intellect, and tenacity. He invented paid search before Google perfected it. He seems to be a never ending fountain of good ideas.

But Bill is not alone. There are many entrepreneurs who would, if given the opportunity to operate in parallel, produce a number of interesting companies.

This week we saw Evan Williams launch Obvious Corporation. I threw together a quick post noting that I think it's interesting and that I intended to blog more about it later (which I am now doing). My friend Steve left this comment to that post:

Am I missing something? Isn't Obvious an incubator?

Well I guess you could call Obvious an incubator, but I think of incubators as entities that have capital and attract ideas looking for a place to turn into businesses. I think that model doesn't work as we all proved to ourselves in the late 90s.

Obvious is a place where Evan and other developers can build web services and launch them. They can do this in parallel as they have already done with Odeo and Twitter. Buying out the investors in Odeo means that Evan and his colleagues are doing this with their own time and money.

That doesn't mean that they've completely rejected the venture capital model. Evan says the following:

When justified by growth, resource needs, and desire of the team, we will spin off growing properties to form their own entities (with outside investment). It's not that we're against investors and acquisitions. That model works great for some things―especially once the idea is proven.

I think its a smart model. Build a network of web services (Evan calls them web apps), use the popularity of one service to launch another, keep the services that are small but successful, shut down the ones that don't work, and spin off the ones that really take off. I like it.

I think we are seeing more and more parallel entrepreneurship. It makes sense. Entrepreneurs realize that serial entrepreneurship means putting all their eggs in one basket. VCs get to leverage a portfolio effect and I think we'll see more entrepreneurs try to do the same.

This San Jose Mercury story talks about how Kevin Rose is trying to build a second company, Revision3, while still running Digg. It quotes a couple parallel entrepreneurs I've gotten to know this year, Sam Yagan and Scott Rafer.

Sam Yagan, who co-founded the file-sharing service eDonkey in 2002 and the online dating site OkCupid in 2003 (the former was shuttered in late summer), said, ``No question there's a loss when the CEO isn't around. If someone came to me with a great [second] start-up idea now, I wouldn't do it.''

And

``Basically, everyone I know is involved in five or six projects right now,'' said Scott Rafer, 38, former CEO of the search engine Feedster and now CEO of blog tracker MyBloglog.com, co-founder of Mashery.com, a stealth-mode company aiming to help Web developers, and chairman of WiFinder.com, a WiFi hotspot directory. ``VCs spread their risk across numerous companies,'' said Rafer. ``Why shouldn't we?''

Sam's right, you can't be a parallel CEO. But Scott is right that you can be a parallel entrepreneur. The key to the parallel entrepreneur model working is getting the management part right. Each project, once it gets launched, needs focus and attention. Someone has to be minding the store. If parallel entrepreneurs can figure out how to make that part work, they might be able to operate in parallel forever.

Comments

[cfw]

Warren Buffet looks like a model for the parallel entrepreneur. He makes it a point to not invest in things he cannot understand. So long as the parallel entrepeneur in the tech business can honestly claim to live by the "only invest in what you understand" rule, then parallel tech work sounds fine. I suspect 95% of the tech entrepreneurs (including Chad Hurley) could not pass the test of investing only in what one understands. CH still does not understand how his baby will throw off cash to pay its bills and show a profit. So, CH looks fine as a non-parallel CEO or entrepreneur. Backing CH as a parallel entrepreneur risks delay and failure from insufficient focus on fundamental problems that no one yet knows how to solve.

[Dorrian]

Defining entrepreneurship is key to this discussion. I like Jeff Hawkins' (Palm) definition in which he states that succeeding as an entrepreneur means transitioning out of that job and becoming a success. I like that definition because I personally associate entrepreneurship with enormous personal risk, particularly financial, as well as relentless dedication and focus. I think of people like Bill Gross as having left entrepreneurship some time ago. There should be a distinction between smart and successful people who dabble in many ideas and the entrepreneur, each of which require their own recipe for success. The entrepreneur that tries to act like the former will never make the coveted transition.

[Peter Cranstone]

Great post... the key is the management and then focus and execution. Sure VC's invest in lots of businesses - that helps spread the risk, however what they (the VC's) stress)is solid management. Bill Gross is more the exception than the rule. Very few people can pull it off and return sustainable companies.

[Scott Rafer]

Thanks Fred. That's why I liked this quote better:
And knowing how to prioritize is critical. “You can only have one day job. The people on every project need to know what comes first. Mashery, WiFinder, et al., know that if MyBlogLog has a crisis ― whether a good one or a bad one ― I drop everything else to go address it.”

http://rafer.wirelessink.com/?p=61

[steve]

Fred I would love to be a parallell entrepreneur and am trying to organize myself for that (50/50 chance I actually do it -- the work/life stress calculation may not work out.) But if i understand your point in this post, the difference between Obvious and an incubator is the source of capital -- the entrepreneurs fund their ideas until they either die, fly solo, or show enough viability to attract professional investors. was idealab 1.0 that? or did bill gross have outside capital all along? and is idealab 2.0 that now?

[Zoli Erdos]

I guess it's a matter of how we define "entrepreneur" - my sense is that what you're talking about is more an investor / advisor / mentor role. In a certain way VC's are entrepreneurs, too, e.g. Peter Rip recently stepped in as interim CEO of his portfolio company.
But I think it's critical that the entreprenur(s) whose execution everything depends on should stay focused and maximize the chances of winning in the one and only venture they work in.

[fred reynolds]

A "parallel entrepreneur" seems to me like someone who can't focus on one company at a time. In this competitive environment successful companies need extreme focus and a solid team. Why would a vc want to invest in someone that is not completely dedicated to an investment? Steve Jobs is an executive that has pulled it off, but this is rare. Rafer is no Steve Jobs.

[Brian]

Nice post Fred. Never had a term or codification for it, but it pretty much explains what I've been up to now. I also like how the "incubator" thing was debunked - this is very much not an incubator.

I've been working to frame an codify my activities in the form of an entity, and I think that will emerge soon. Of course I'll announce it on my blog, and of course Kalivo will be heavily involved.

Per Scott Rafer, knowing the priorities is key and not being a parallel CEO. Kalivo is a focus for me.

-- brian

[candice]

You know, saying "He's no Steve Jobs, so he shouldn't even try" doesn't get you anywhere. There's always someone more successful, prettier, thinner, flat out better, in any field.

"Parallel entrepreneur" is a great concept for all us 20-something video game junkies who multitask everything.

Complete dedication to an idea isn't really that smart either. I once worked for a guy who wanted to run a managed network security service. He was married to the idea, even when it turned out they couldn't find a market for it.

[Isaac Garcia]

You see Candice, et al., that’s just it. The world is full of people with ideas. I'm sure my dog has ideas if she could speak.

The success of an entrepreneur isn't in coming up with ideas so that "other people can execute." This is reserved for investors, mentors, philanthropists, people who suffer from ADD...

The execution of the idea is what matters.

I too have fallen prey to the elixir of being a "parallel entrepreneur" in the past. While both of the companies didn't go down the drain (both companies were acquired), I would be lying to myself if I didn't admit that the [dedicated] execution of one idea would have been better than the semi-execution of two ideas.

Unfortunately, this is only something that experience will teach any of us (I was in my 20s when I was a "parallel entrepreneur.")

Starting multiple companies at once is not only a recipe for dissatisfied customer, employees and investors...it’s a recipie for disaster.

Anyone ever heard of cognitive dissonance?

Oh, and any VC that says "they are okay with you starting multiple companies at the same time" is lying through their teeth.

"The Rise of the Parallel Investor" is also a strong indicator of a bubble-market economy whereby everyone and their brother believes they can "jump on the dot-com,er....web 2.0 bandwagon."
(other examples include real estate flippers, foreclosure experts, day traders, herbalife resellers and AMWay representatives)

[fred reynolds]

Candice, your inexperience is obvious. You need to prove yourself by exhibiting the ability to execute your plan and create shareholder value. Someone like Rafer has not done that in any previous venture, so why should I (an investor) let him get distracted?

[Andrew]

Hey Fred,

It's funny that you mention this, I've been talking about "the parallel entrepreneur" for a couple of years and most times when I mention it I get one of two general responses. One is that it is not a sustainable model because of the extraordinary focus required to build a successful business. The second is that a "parallel entrepreneur" can only work in early stage projects. I generally agree, I think the concept works well for start-up and very early stage companies where there are few stakeholders and it is easy to maintain a coherent common vision. In many ways "the parallel entrepreneur" is an iconoclast who operates largely from experience and intuition. I have started five companies (two of them venture backed) and I have found that once Instituitional investors get involved the entrepreneur needs to either commit full time to the venture, take a secondary role within the company, or step away altogether in order for the company to succeed.

I have recently exited a company post funding to pursue exactly what we are talking about, and I am finding that having informal partnerships that provide services is a key ingredient in the formula for being a successful parallel entrepreneur. I'd love to talk further with you about this because I really would like to build the thesis out so that a clear roadmap can be constructed for how this model can work.

[candice]

Dude, I'm twenty-five. Go ahead and call me as inexperienced as you want. That's fine.

You just sound so old establishment talking about what you will let your precious little entrepreneur do as an "Investor." Odeo/Obvious bought back control for that reason, I'm sure.

[Kashif]

I can boast myself to be in the same category (although nowhere to the same scale). I have number of web projects going on ranging from media portals to e-zines, while dragging a day job as well :)

[Kevin Marks]

I wrote about this on Thursday - it makes sense of the trend for smaller amounts of capital and code needed to implement an idea. It's a personal portfolio.

[CoryS]

Agree with Kevin Marks and have to say that a business plan that is narrow in its solution, e.g. Odeo's podcast directory competing with iTunes (if that is what it was supposed to be) is very different than what Obvious is turning into. While the idea of multiple approaches to leverage talent in an arena are logical, focus is easily lost on any one project that isn't a clear winner.

Is that bad for the entrepreneur or the investors? My guess is it depends if the investors bought into the team, the sector or an idea. If the idea was the investment thesis and not the team or a sector, then throwing away the idea could be a major issue.

What Riya is doing probably highlights that the team and the sector were interesting and that one idea (consumer uploaded photos with a tech twist) wasn't really the only investment goal. When the team needs to make a strategy change, the investors can agree to it, management stays on track and the focus can shift in a quick manner.

While no one path is 'right', my [too few] years of experience has proved that execution, good decision making and profitability are what matter, not multi-tasking, parrallel development and/or stretching unsustainably thin.

Great discussion.

[Shanti Braford]

Unfortunately, the model Evan is pursuing is very hard to come by for entrepreneurs.

Let's face it - you basically have to already have succeeded at one startup to pursue this kind of model.

My frustration was wanting to start something like this with a $0 bankroll. It didn't get very far. We were going to use a VC-like model to reward contributors with equity, but it's very hard to get people to contribute time based on 100% equity compensation.

Although I've managed to grow my personal businesses to almost $5k per month in revenue (80% profit margins), while working full-time jobs, it's still not quite enough to pursue full-time.

That's why entrepreneurs who could theoretically make it on their own (given enough time), would still prefer to work with a Venture Capital firm, not just for the money, but for the connections, etc.

It's also why you'll always be in business, Fred. =)

[Paul Elosegui]

Fred,

your parallel label seems an oxymoron to me. Most companies with innovation department toy and doodle with different ideas; Google is an extreme case of parallel tracking.

"Obvious Corporation" is just an internal company incubator, like millions of others. Admittedly this is intrapreneurship. I run all my innovation this way.

It is the working entrepreneur's version of diversifying out specific risk; portfolio theory. The trick is to use the same assets and teams to parallel up (diversify) as much as possible. That is the hard bit.

I like the debate on how much can you parallel up ? Capital, mental processing power, communication bandwidth and execution capacity set the limits.

When you parallel too much, it feels as though you are trying to drink down the ocean. Obviously, Bill Gross has more swallowing power than the rest of us.

[Suzie Dingwall Williams]

I agree with you - I too, have strong stirrings when I hear of Bill Gross and his rise from the ashes of old Idealabs (which at one point seemed to have as many shops as Starbucks). But is a guy running a 70-person team of project managers a parallel entrepreneur? Just because I own size 2 jeans, does that mean I'm a size 2?

I would love to see Bill recognized for what he is - the master of creating business generation centers.

[haig]

I think its important to note that building multiple products/services at the same time is different than building multiple businesses at the same time. I look upon Bill Gross as just an entrepreneur (not parallel), his sole company being idealabs and its products being other companies. The same way a typical company may have multiple product areas, each with its own group, managers, engineers, etc. The difference with idealabs is structure. They are legally separate entities for the sake of raising outside capital and isolating risk so that one product won't bring down the rest. He wasn't the first to come up with this idea by the way; the most succesful that comes to mind is Thermo Electron which pioneered this notion of 'spin-out' strategy.

[Rick]

Hello all, as a Project Developer for my own Company over 4 years Solo, I never stopped thinking and engaging in different ventures.
The term Parallel Entrepreneur is something I can relate to for sure. I haven't visited many sites of those who are.... ie Bill Gross and such, but i do think that there is something to be said for the future and "the now" Entrepreneur.
People are smarter and resources and less common.
Could we say Google, kijiji and facebook to name a few were created with tunnel vision?
All these ventures to me displays a profound example of parallel entrepreneurship within there own application. Spining Multiple business within there main platform.