Ah, the “L” word.
No, not “love”. The other “L” word.
You know the one…the one that puts startup founders into an internal rage. The one that signals to the founder that the person using the word finds their business less than exciting. When someone refers to the founder’s business as an “L” business, it usually means that someone thinks it will be a slow-growing, part-time, hammock-lying, uninteresting venture with no hope of any sort of financial exit. The word should be only discreetly uttered aloud in reference to a business, so please read the following silently to yourself: Luh….luh…Lifestyle!
Oh, the defamation! The slander! The shame of it!!
This post is to help those of you who’ve been labeled with the “lifestyle business” tag and felt dissed and offended, recover from the trauma. Hopefully, by talking about the issue of “lifestyle businesses” I can help those who’ve been accused of such a suggestion to understand the origins of the phrase, accept that it may be true and move on with the knowledge that every business reflects the founders lifestyle.
TechonomicMan’s First Observation: Is it actually true? Usually, the “lifestyle business” tag gets used by professional investors…VC’s and angels…who do not believe your business plan warrants significant equity investment. There are lots of reasons why investors won’t make equity investments in companies and the founder who exhibits a history or a plan that comes off as complacent and light on the drive needed to produce returns an equity investor needs, may get the “L” tag. Examples of businesses that may get the “L” tag due to the founder include the majority of tenured professors and medical doctors who launch new ventures. These are VERY difficult, lucrative and, in most cases, irrational professions to walk away from to launch a tech startup. Successful consultants in their field are another example of founders who, without just the right set of other circumstances, often get accused of lifestyleness. Guess why? Because it is so often true! These founders are often trying to fit the launch of the company into their professional lifestyle!! We appreciate that you give up your evenings and weekends and vacation days to work on your venture…but that makes it a hobby. And professional equity investors need to know that everything else professionally is zeroed-out and the business you’re asking us to back is the 24/7 obsession it needs to be.
Complacency is the other “lifestyle” give away. “Well, we had trouble solving a technical issue on the product and my technical guy had to spend time fixing some things with a prior consulting gig he had and so I had to call someone who hasn’t gotten back to me for 2 weeks…etc., etc., etc.” is a sign that fixing the technical bottleneck was not the most important thing in your life. And complacency can be seen a mile away by experienced investors.
So before getting indignant about being accused of appearing to be a lifestyle business, understand that while you may be the exception to the investor’s experience with lifestyle businesses…you’d indeed be the exception.
TechonomicMan’s Second Observation: Some great companies are lifestyle businesses. Ok. so you suspect the equity investor has tagged you with the “L” business word. Have you stopped to think about what is so tragic about that? One of Ben Franklin Techonology Partners most successful companies was a lifestyle business…currently with about 4,000 employees, almost entirely owned by the “lifestyle” business founder. Oh, woe is him! If you exhibit the kinds of issues that a typical “lifestyle” founder exhibits, and equity investors decline your pitch, you absolutely, positively can still build a hugely successful business. As big as you want. Think Yuengling Beer…still family owned, not parsed out in preferences to a bunch of venture capitalists… and after >150 years, the 3rd biggest beer maker in the US. Without that outside equity, I will concede, you’re gonna need a few more pinches of luck along the way. But with a little luck, you could have both a nice business and a lifestyle of answering to yourself instead of an exit-driven group of investors.
TechonomicMan’s Third Observation: It turns out that every business is a lifestyle business. This is my overall point with regard to the Lifestyle Business moniker. Know who you are as a person before you decide who to be as a business. (I’d like you to read that last sentence again for emphasis, because I think it is a good one.) If you plan to attack a market segment dominated by one or more of the planet’s Fortune 5000 companies, you’d better be 1) able to commit 24/7 to the company and 2) capable of delivering Fortune 5000 success. Do not lie to yourself or to others. Do not rationalize that you’ll be the exception…you need too much luck for that. Be in the right place in life before you try to start a growth-oriented startup. Your business is going to DOMINATE major time-chunks of your life and your lifestyle will not be the same afterward. Add some employees who have families that depend on the success of you and your business and, well, you’ve got yourself a life-consuming obligation and therefore, a lifestyle business with 2 employees…or 4,000.
So I’d start with the end game in mind. The business you build had better fit the lifestyle you expect to have. And vice versa.