Real Life Isn't Like Shark Tank: If You’re Betting Your Entire Future on One Startup, You’re Crazy

This week, I want to talk about DIVERSIFICATION. I love diversification. It's the reason I'm not freaking out right now as the world is going nuts around us. But before we get there, let's talk about this week's episode of my podcast FOMO Sapiens.

This week's FOMO Sapiens...is all about how to get what you want during a negotiation.

On this week's episode, Professor Alexandra Carter, director of Columbia Law School’s Mediation Clinic, explains how to overcome FOMO when negotiating for work and in everyday life. Alex and I went to college together and she was always one of the smartest people in the room. She's gone on to become a master at negotiation and just came out with a new book called Ask for More that's all about how we can learn to ask for and get what we actually want. I loved the book and have been applying it in my own life. In fact, I was able to meaningfully improve the terms of two negations in the past several weeks thanks to Alex's method. Plus, this week's FOMOment of the week is a special one. I invited social media comedy sensation Matt Buechele (@mattbooshel) to explain how he’s creating viral internet comedy during the Covid-19 lockdown. His stuff has been keeping me sane during quarantine...you'll love it. Listen on Apple Podcasts, Spotify, or wherever else you get your podcasts.

And now on to the topic of the week....diversification.

When I tell people that I’m a part-time entrepreneur, they always ask me the same question: “If you watch Shark Tank, the Sharks say that you have to go “all in” and stay lightening focused if you’re going to succeed.”  I have easily gotten this question 300 times. I've heard it in New York, but I've also heard it in Latin America, Africa, Europe, and Asia. This question follows me across the globe!

As I wrote about in last week's post - During the 2008 Global Financial Crisis, I Got Wiped Out. Here's How I Used Creativity to Build A Crisis-Proof Career - And How You Can Too - I’ve got a different take. I believe that pursuing entrepreneurship on a part-time basis, what I refer to as being a 10% Entrepreneur, is a smart way take part in the excitement and upside of new ventures without risking everything.  I guess it's basically the anti-shark tank way of building your business. How, people wonder, can I disagree with the Sharks?  Easily. I’m thinking from the perspective of an entrepreneur rather than an investor.  

When you start something new, you accept the statistical reality that you’re probably going to fail. Venture capitalists also implicitly understand this math, since most of them started out as entrepreneurs. Eventually, however, they opted to manage a portfolio of investments, which completely changes their perception of risk and reward. You can accept a few (or more) epic failures when you’re looking at the world from their perspective. The winners let you forget all of their fallen comrades. 

I don’t fault investors for requiring people to go all in. It’s their money, after all.  Still, this expectation extracts a heavy toll. Entrepreneurs succeed or fail based on what happens with just one business, so the stakes are crushingly high. Unlike a venture capitalist, if you fail, you don’t have a nice portfolio of investments to fall back on. A “go big or go home” mindset looks great once you’re rich, but it can be unnerving when you’ve got a family, a mortgage, or bills to pay.

That’s where part-time entrepreneurship enters the picture. By making angel investments or taking advisor roles in exchange for equity, you can build a diversified portfolio of ownership stakes.  This approach gives you downside protection while opening new doors and even creating onramps to future ventures. In that sense, you add your 10% to the 100% you are already allocating to entrepreneurship to become a 110% Entrepreneur.

Since I started living by this strategy, I have been an investor, advisor, or founder of more than 20 ventures. I've invested in real estate, in highly successful ventures like ipsy and Afiniti, and in a venture capital fund in Latin America. I've started my own company as well. As I've done so, I have learned by doing that this strategy is powerful. Not only have I learned a ton and met amazing people, but I have a diversified myself. Even during this pandemic, I have had the peace of mind that I don't have all of my eggs in one basket. While some of my investments have been deeply affected are may fail, others are actually thriving.

Once you decide to become a 10% Entrepreneur, the next step is to find a way to invest your resources as effectively as possible. Few people, especially full-time entrepreneurs, have unlimited time and capital to spare, so how can you make the most of both?

First, focus on impact rather than time invested.

By leveraging the knowledge and the network you’ve built up throughout your career, you can trade your time for “sweat” equity. In most cases, it doesn’t take many hours to provide critical insights or make introductions to key hires, investors or clients. That means that even very busy people can find the time. Using that approach, a friend of mine, the COO of a large venture-backed startup, served as an advisor to roughly twenty companies over a few years. In addition to building a valuable portfolio, she’s also created options to either invest in or potentially join these companies if they really take off.      

Second, if you’re going to invest your own capital, look for opportunities where the amount of money required fits your circumstances.

When I first started as an angel, I felt pretty insecure about the amount of capital I could invest. Then I learned when Twitter was raising money, its cofounder Evan Williams e-mailed Dick Costolo to ask whether he wanted to invest $25,000 or $100,000. Costolo, whose investment was an onramp to becoming Twitter’s CEO, responded: “I’m on the $25k bus.” If a guy who sold his company to Google feels comfortable being one of the smaller investors in a company, you can, too. Even “small” investments can pay off big: Costolo made millions by riding the 25k bus. You can make plenty of money by riding the 10k bus as well, especially if you combine it with an advisor role.

Third, focus relentlessly on diversification.

By leveraging your network, your base of knowledge, and a concentrated investment of resources, you can diversify your career and expand your horizons. You can also generate future opportunities. sharpen your skills, and have fun in the process. As someone who has followed this approach over the last five years, I’ve learned that doing so doesn’t mean that you lack focus. Quite the opposite – you end up 110% focused and far more likely to succeed.  

If you're interested in learning more, check out www.patrickmcginnis.com or The 10% Entrepreneur. As always, you can pick up my new book Fear of Missing Out: Practical Decision-Making in a World of Overwhelming Choice at your bookseller of choice.