What is your motivation for success?
The thing about “incentives” is that they have to actually incentivise. How you incentivise is first by measuring and then by rewarding. You don’t get performance by watching (measuring) and you definitely don’t get it by rewarding alone.
Phase I of the Spring Cohort of the Raise programme is heading to a close. The startups have been schooled on everything from CAP tables to five-year projections. You can find much of this on our blog because we do things a little differently. For us it’s not just about churning people through a programme – it’s about getting lasting results because for us the success of the startups really matters. When you’re in a funded programme (either an “accelerator” or a “venture fund”) your incentive to see startups success is skewed. It doesn’t matter whether they succeed or fail, you get salaried anyway. It doesn’t matter if you are dedicating your time to them or offering the best advice because their ups and downs do not predicate your rewards system. You may then be measured on throughput (quantity) rather than success (quality). It becomes important that you coach thirty startups a year or fund ten innovations a year. It matters not a jot on whether anyone thinks these are good bets. You’re being measured and rewarded on the wrong things.
I’ve been around long enough in this industry to see both sides of this. To see unrewarded success, to see abject failures gain great acclaim. To see everyone put the wood behind the arrow on unrealistic and poorly realised business plans. Maybe it’s that people believe stuff easier if other people believe it – but I’m beginning to think that there’s two parts to it. You need at least one to do this work.
- The ability to recognise, scope and predict a possible business model and the potential outcomes
- The willingness to actually read a business plan and reason out the outcomes
The first one comes from experience. The second from work. I see precious few people with the experience (and the ability) to recognise a great business model and who have the imagination to figure out the details and risks. I also see precious few people who are willing to admit they don’t know and therefore read the details and do the research. Most people don’t do this because it looks and feels like work.
It can be as simple as just looking at the per-unit margins and working backwards. If you need to ship a million doohickeys just to make ends meet for a single person, you’re doing it wrong (or better be selling alcohol, booze, fidget spinners or something similar – I think yo-yos are due a comeback).
To do it right you need both. The ability (experience) to recognise possibility and the work ethic to reason out probability.