Great Entrepreneurs’ Secret:

Smarts, Guts, and Luck

Written ByAnthony Tjan

As venture capitalists, my partners and I meet dozens upon dozens of entrepreneurs pitching their ideas and dreams. We love them – especially when their passion comes with capabilities and a good idea. I have been fascinated in understanding the “DNA” of great entrepreneurs in an effort to identify traits and markers that can serve as early clues for future success. I have come to conclude that great entrepreneurs share and need SGL: Smarts, Guts, and Luck.

Smarts. If you eat horseshoes for breakfast and always win in Vegas, then all the better for you. You ain’t the norm. “Smarts” is the best foundation for any entrepreneur. Entrepreneurial smarts, however, needs to be defined and it certainly requires going beyond traditional MBA education. If I were honest, and not influenced by the fact that I hold one of these degrees myself from the institution closely affiliated to this site, then I would say that there’s a lot of truth in what my partner Mats Lederhausen has said: “Most MBA’s make for sucky entrepreneurs.” This is not because they are not smart, but because an MBA–while potentially helpful–is not a requirement. Other smarts are.

The best self-made entrepreneurs possess outstanding street smarts, intuition, emotional and conceptual intelligence as much as–and often more so than–book smarts, analytics, and managerial intelligence. It is why founders are usually very good getting companies to a certain level, but usually less good at scaling their idea. The CEO who scales a company probably did could not have founded the business and, vice versa, the person who founded it probably could not have scaled it. The exceptions of Michael Dell, Steve Jobs, Bill Gates, and Howard Schultz are just that: exceptions. They possessed the rare capability to bridge across the analytical and the creative, across the left and the right side of the brain. For our early stage investments, I am biased toward the right side- the more creative, conceptual and street smarts. “Visionary Skills 101″, just does not seem to be on many MBA curriculums.

At the early stage of a business it is critical to build culture before company. The culture comes from the evangelism, heart, and fire in the belly of founders. You need to create a belief system, energy, and inspiration during the early stage of business and, as it grows, balance that with structure and process. If you put the latter (left side thinking) too early you lose the chance to form the soul of the company – you basically begin managing when the company has not yet been led.

Guts. Great entrepreneurs have the guts to go after big ideas. They are willing to put themselves out there when most worry about, “What will others think?” The definition of entrepreneurship that Harvard Business School Professor Bill Sahlman made prolific- “the relentless pursuit of opportunity without regard to resources” forms the center of the entrepreneurial mindset. Entrepreneurs don’t worry about the resources they lack, but about the resourcefulness required to get the big idea done.

It’s gutsy for people to pursue a mission despite the gulf that exists between their available resources and the largesse of their ideas. It is gutsy to swing for the fences when one could settle for a single or double. It’s gutsy to shape change that most cannot yet see and persevere forward with singular clarity. Here’s an amazing fact: About two-thirds of billionaires on the Forbes billionaire list started with nothing. Desperation can be a good motivator, but these folks were born with the fire in the belly and vision in the mind. Read the biographies of Andy Grove, Ralph Lauren, or J.K Rowling and you’ll find some pretty inspiring stories. As Eleanor Roosevelt stated so eloquently, “The future belongs to those who believe in the beauty of their dreams.”

Luck. Even with all the smarts and guts, you don’t get the glory without some luck. Requisite elements of fortuitous timing, serendipitous encounters, or inexplicable higher connections come in handy. Yes, people can create the circumstances for luck, but that should not discount the value of Lady Luck’s gracious blessings. Recognizing that luck is part of the success formula helps maintain the necessary and important humility during the entrepreneurial journey and beyond. Circumstances beyond one’s control will always occur. Accepting this vulnerability and understanding that sometimes you just need the cards dealt in your favor is necessary to maintain the conviction, courage, and momentum of entrepreneurial enterprises. As I think back on the ups and downs of my prior entrepreneurial experiences, I am certainly grateful for my kismet being on the right side more often than wrong.

The central philosophy of my investment firm, Cue Ball, is that human capital trumps everything else out there. We consistently say it is all about the people, and we would take a B business plan with an A team over an A plan with a B team any day. And in that A team, there’s likely to be a good triple dose of SGL.

What about you? Have you seen any other key traits necessary for entrepreneurial success?