Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9 pm ET. This is excerpted from my recent interview with Patrick J. McGinnis, @pjmcginnis. Patrick is a venture capitalist and private equity investor who founded Dirigo Advisors, after a decade on Wall Street, to provide strategic advice to investors, entrepreneurs, and fast-growing businesses. As a 10% Entrepreneur, he has built a diverse portfolio of investments in new ventures in the United States, Latin America, Europe, and Asia. A graduate of Harvard Business School and Georgetown University, he writes for Business Insider, Huffington Post, Boston Magazine, and Forbes. He lives in New York City. For more information, visit www.patrickmcginnis.com.
SmallBizLady: WHAT IS A 10% ENTREPRENEUR?
Patrick J. McGinnis: What does it mean to be a 10% Entrepreneur? You will invest at least 10% of your time and, if possible, 10% of your capital into new investments and opportunities. By leveraging your base of experience and your network, you will choose opportunities that play to your strengths and that are complementary to your career and your interests. Most important, you will be the owner of everything you create. You may change your career at multiple points in a lifetime, changing functions, changing roles, and changing companies, but you’ll always be creating value for the most important employer of all: you.
SmallBizLady: WHAT IS THE MINDSET YOU NEED TO BECOME A SUCCESSFUL 10% ENTREPRENEUR?
Patrick J. McGinnis: At its core, entrepreneurship is about being an owner. You can work for years collecting paycheck after paycheck, but if you’re not an owner, the opportunity to build real wealth is usually limited. In comparison, when you are an owner of part of a venture, it will grow as a direct result of your hard work and the work of all of the people who contribute to its success.
SmallBizLady: WHY WOULD SOMEONE WANT TO BE A 10% ENTREPRENEUR?
Patrick J. McGinnis: A recent Gallup Poll revealed that nearly 70% of American workers are either “not engaged” or “actively disengaged.” Although traditional corporate roles are neither as stable nor as rewarding as they once were, pursuing the upside and excitement of full-time entrepreneurship is not for everyone. Depending on your particular skills, your interests, and your stage in life, you may find that taking an entrepreneurial course is not practical or even accessible. The answer to this dilemma is to become a 10% Entrepreneur. You don’t have to be a full-time entrepreneur to be entrepreneurial. Instead, you can invest, advise, and start entrepreneurial ventures all without leaving your day job.
SmallBizLady: WHAT ARE THE BENEFITS OF 10% ENTREPRENEURSHIP?
Patrick J. McGinnis: First, it’s about diversification: If you think of your career as an investment, and of course it is your most important investment, then your portfolio, and by extension your life, is heavily exposed to just one position: your job. Unfortunately, one job is enough when it comes to the reality of building a career in a volatile economy. Second, it’s about creating avenues to upside in your career. You can invest in new ventures that could become valuable in the future. Third, it’s about making life richer and more interesting.
SmallBizLady: HOW CAN YOU BALANCE BECOME A PART-TIME ENTREPRENEUR WITH YOUR DAY DAY JOB?
Patrick J. McGinnis: At a time when technology disrupts and transforms even the most established industries seemingly overnight, thinking like an entrepreneur is critical. Here’s where being a 10% Entrepreneur can make the difference: entrepreneurs learn by doing, failing, trying new things, and then starting all over again. There are no short cuts and no magic bullets. If you want to learn to think like an entrepreneur, then you can take responsibility for your education and pursue your own projects, bringing everything you learn back into your day job.
SmallBizLady: HOW DO YOU MAKE THE MOST OF YOUR RESOURCES I ORDER TO MAKE THE TIME YOU ARE PULLING INTO THE BUSINESS COUNT FOR MORE?
Patrick J. McGinnis: Look for opportunities that draw on the talents you have already developed in your life and your career. The more closely a business opportunity matches your areas of expertise, the more likely you are to get up to speed quickly, make the right connections, and increase your chances of success. Simply put, if you’re playing to your strengths, you are far more efficient.
SmallBizLady: WHAT QUESTIONS SHOULD YOU ASK YOURSELF IN ORDER TO KNOW IF AN ENTREPRENEURIAL IDEA IS GOOD OR NOT?
Patrick J. McGinnis: There are three critical questions that you need to answer in order to decide whether to invest time, money, or both in a new venture.
- Is the business attractive? Is it positioned for success, and does it operate in an attractive industry?
- Are your partners, from the investors to the managers, competent and ethical? Are they the right people for the job?
- Can you contribute to the success of the company in order to personally increase the value of your investment?
SmallBizLady: AT WHAT POINT DO YOU ABANDON AN ENTREPRENEURIAL IDEA IF IT’S NOT WORKING?
Patrick J. McGinnis: Ironically, failure has become harder to “achieve” these days than in the past. Given the falling cost of technology – you can now build and maintain a website for almost nothing – you can also “not fail” and keep a business going, sort of in a zombie like state, indefinitely. Whether you are a 10% Entrepreneur or a 100% Entrepreneur, I fall back to a simple question: is the highest and best use of your time? If you can answer that question affirmatively, keep going. If not, pull the plug or make a hard pivot.
SmallBizLady: IS FINDING INVESTORS HARDER OR EASIER (OR ABOUT THE SAME) FOR THE 10% ENTREPRENEUR?
Patrick J. McGinnis: If you’re not full-time, it can be harder to raise capital, at least until you have a team that is working full-time on a project. The good news is that if you’re working your day job, you also have the cash flow to self-fund for a while, which means you can own more of the business for longer and then raise money when you have a proven business model. That means you’ll enjoy better terms and hopefully a better valuation. If you do plan to raise capital at some point, you might find that you’ve reached the right time to transition to full-time entrepreneurship. If you have capital, you can pay yourself a salary and the whole enterprise becomes far more sustainable.
SmallBizLady: HOW DO YOU MAKE THE MOST OF TIME?
Patrick J. McGinnis: Dedicating 10% of your time is more about mindshare than about minutes. By looking for opportunities that draw on the skills and the network you have already developed in your life and your career, you will be far more effective whether you are seeking out opportunities or helping them to succeed. Your best and likely most successful projects will be the ones that leverage all of the knowledge and relationships you’ve built. Simply put, if you’re playing to your strengths, you are far more efficient.
SmallBizLady: WHAT IF YOU ANY MONEY TO INVEST IN YOUR BUSINESS IDEA?
Patrick J. McGinnis: Investing isn’t just about money. New ventures need money, but they also need assistance from people like you who can offer a wide variety of skills and services. So even if you don’t have financial capital, you can still invest in the form of sweat equity by using time and your smarts as your currency. Depending on your skills, you will find abundant opportunities to work for sweat equity. There are plenty of services that young businesses will consider as an in‑kind capital contribution in exchange for stock. Businesses also look for ongoing support such as legal advice, financial guidance, marketing expertise, or connections to business opportunities and partnerships. As they grow, they need help from people who come from lots of different backgrounds. Although none of these contributions are made in the form of cash per se, they are often just as valuable.
SmallBizLady: HOW SHOULD YOU THINK ABOUT YOUR DAY JOB WHEN YOUR’RE BUILDING YOUR NEW BUSINESS?
Patrick J. McGinnis: Being a 10% Entrepreneur is neither anti-job nor anti-corporate. It’s quite the opposite. Since your day job is the part of your life that will permit you to work on your own ventures in the first place, you need to make it a priority. Respect the line between your 10% and your employer, never use corporate resources for your own projects, and be honest with your colleagues. The people you work with every day may end up being loyal customers, future partners, or early investors.
If you found this interview helpful, join us on Wednesdays 8-9 pm ET; follow @SmallBizChat on Twitter. Here’s how to participate in #SmallBizChat: http://bit.ly/1hZeIlz
For more tips on how to start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.
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