Last year I had very little understanding of venture capital; what it was and how it worked.

VC’s were this near mythological creature that held the fate of startups in their hands. To listen to some entrepreneurs talk, VCs are like a fairy godmother who could grant instant success to any startup they bequeathed their touch upon. While other entrepreneurs likened taking VC money to Faust selling his soul to the Devil.

Then, last year, I had the opportunity to be Highway 12 Ventures’ Entrepreneur-in-Residence. Now that I have moved on to other things I wanted to share with you the most important thing I learned this last year.

9/29/08 The Day the Rules Changed

September 29th. Do you remember what happened that day? Do you remember where you were? It was a Monday. I was on a plane with the Highway 12 partners heading to Boston.

This trip was memorable for several reasons. It was my first Village Ventures fund managers meeting. It was my first trip to Boston. It was also the day that the Dow dropped 777 points, “all the way” to 10,365 (of course we all know now that we hadn’t seen anything yet).

Being in the air all day we had little idea was going on. That night was the kick off event for the Village Ventures fund managers meeting. Packed into the basement of an Italian restaurant with (I’m guessing) 60-70 VC’s, lawyers and bankers was a surreal experience.

I felt extremely out of place. I was way out of my element. But I was fascinated. The room was on fire with nervous conversations. Everyone was talking about all the ramifications and betting on how low the market would fall. (For the record EVERYONE was WAAAAAY off.) One gentleman, an obviously seasoned VC and, I was told, one of the original Boston VCs (can’t remember his name) made a statement that stuck with me:

“No one has ever seen a market like this. All the rules have changed.”

At some point in the night, feeling a bit overwhelmed by everything, I found an empty spot along the wall to collect my thoughts. Being the dork that I am I took out one of the Moleskine’s I always keep with me and wrote down a few thoughts.

“At the Village Ventures fund managers meeting opening night reception. Pres Bush’s bailout plan didn’t pass. The market fell over 700 points. Banks are getting bought and the effect is being felt across other nations around the World.

The room is a buzz with speculation, concern, lots of fear and I think, for some, excitement. The next 7 years will belong to the bold and the wise. Now is a great time to be an entrepreneur. But only if you’re prepared and blessed with vision.”

What Makes Great Entrepreneurs

It is from that experience that I learned what it really means to be an entrepreneur. The concern and fear in the room came from those who only saw loss in the disruption; from those who were only able to look backwards. The excitement in the room came from those who knew that the only way to move ahead was with boldness; from those that knew disruption favors the small and nimble.

Over the next six months I learned what two characteristics make a great entrepreneur.

1. The obsessive desire to reach way beyond their own capabilities.
2. The ability to see their weaknesses and do something about it.

Great entrepreneurs always reach way beyond were any rationale person would. They never quit. They can’t. They also have an intimate understanding of their own weaknesses. They know what they can’t do and a burning desire to prove that it’s less than what other people think.

Great entrepreneurs must simultaneously poses pride and humility. You have to believe that, despite all rationale explanations to the contrary, you will succeed. You can not do this while ignoring your own short comings. Let me repeat that again. You CAN NOT be a great entrepreneur without understanding what your weaknesses are. With that knowledge firmly in their grasp great entrepreneurs turn their weaknesses into strengths. Some things they work on through personal improvement. Some weaknesses are strengths under the right conditions. Some things they shouldn’t try and improve, it’s not worth their time. Instead they find people who posses the strengths they need.

Please note that I have said great entrepreneurs, not successful entrepreneurs. Some who are not great are lucky. Some who are not great are able to reach success at the expense of others. I should also point out than when I use the word entrepreneur, I’m using the more literal French definition; one who takes ownership of something. So even if you’ve never started your own business this still applies to you.

Finally, I would like to leave you with this bit of insight. Great entrepreneurs do not posses any skill or intelligence that everyone doesn’t have. Their only difference is a burning desire to do better. That desire eventually forces you to look inward, deeply inward, beyond the obvious surface level stuff, and acknowledge your own weaknesses. And then fix them.

Most people aren’t really willing to do the first and far fewer are willing to do the second. This, and not failure, are the reason that entrepreneurialism is so hard. It’s also why it’s so rewarding.

Despite the fact that I’m no longer at Highway 12 Ventures, the partners have encouraged me to post more of what I learned during my time there and I’ll be doing that from time to time in the coming weeks and months…

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