When you think of a successful startup, what comes to mind?
For many people, it’s Apple, Google or Facebook: revolutionary companies that have changed the world, led by creative geniuses such as Steve Jobs, Larry Page and Mark Zuckerberg. But what about the hundreds of thousands of businesses that started as a big dream… and never went anywhere?
The reality is, one-quarter of all startups fail in year one and 71 percent of them fail by year 10. You’ve probably never heard of most of the ones that failed, or you’ve forgotten their names. As humans, we have a “success bias” that tends to make us remember only the successful companies—making entrepreneurship seem like a more certain path than it is.
You may also be unaware of the hundreds of thousands of startups and small businesses that are very successful, but haven’t stood out like Apple, Google or Facebook. Interestingly, one of the most reliable ways to be successful is to be, well, boring. Boring industries are home to some very successful companies, and they are typically not home to fierce competitors like Jobs, Page or Zuckerberg.
Of course, the entrepreneurial path you choose will depend upon your ambitions. So if you’re thinking of starting a business, start by asking yourself: What kind of entrepreneur do I want to be?
Swinging for the Fences
Maybe your entrepreneurial passion is to change the world. Maybe you’re motivated by—or skilled in—radical innovation, and you want your product to be a household name. Perhaps you crave Zuckerberg-like fame and status. Or maybe you just want outsized, billionaire wealth, and you want it soon. If so, that’s okay—an innovative society needs people like you. You’ll just have to go out and start the next Google.
This idea of startups as companies that swing for the fences is driven largely by the venture capital community. They’re looking for that startup with the ability to change the world—because they know that most of the companies they invest in will fail. Out of 20 or 30 businesses in a ten-year fund, all a venture capitalist needs is one Google or Twitter to be successful. They maintain a diverse portfolio so that when only a few of their investments succeed, they still come out ahead.
But for you, the entrepreneur, the stakes are much higher. You don’t have a portfolio to gamble on. Instead, you’re betting everything on one company: yours. So if you’re truly motivated by fame, fortune and the possibility of changing the world, then by all means, keep aiming high.
But maybe these aren’t the things that motivate you. If not, there is a good alternative.
Flying Below the Radar
Not all entrepreneurs want to swing for the fences: many are more comfortable flying below the radar. Maybe you just want to run your own business, and like the idea of creating a team, defining a culture and having a sense of ownership. Maybe you want to make really good money—but you don’t need to be richer than entire nations. Maybe you don’t consider yourself a revolutionary thinker. Or perhaps you don’t report well to other people: you need to be in charge. Personally, that’s the way I am. I don’t think I have the skills to change the world, but I like having the freedom to control my own destiny.
I also prefer to play games that I can win. By going into business in a boring industry, you can increase your probability of success—even though the ultimate reward is smaller. For example, if you have a 50 percent chance of success at making $100, that means your reward is $50. If you have a five percent chance of success at making $1,000, that also leaves you with $50.
Boring entrepreneurship also means it’s easier to bootstrap your company, because you can buy or build it with debt: once your debt is paid off, you own the business. When you take venture capital funding—which is often a necessity in high-tech markets with high costs of entry–the investors will always own a huge chunk of your company. And with onerous terms such as liquidity preferences, they’ll get their money back once or twice over before you even see a penny.
So if you’re getting ready to go into business for yourself, do a little introspection first. We tend to think about entrepreneurs as high-tech, venture-backed executives–but the reality is, the vast majority of them are the leaders of boring businesses. And some of them didn’t even start their own companies—they bought them.
Buying Boring Pays Off, Too
The “search fund” model—buying a business, running it successfully and then selling it—is an example of smart, well-educated people choosing to follow the boring path. Pioneered by a Harvard Business School graduate in the early 1980s, it has since been followed by hundreds of other enterprising individuals. The search fund model is ideal for the entrepreneur with great spirit and business sense, but no Jobs-worthy “big idea” that can be executed on. By buying boring companies and bringing strategy, talent and management to bear, you can have a much longer and more fruitful career than those entrepreneurs struggling to get their big ideas off the ground.
Take, for example, Austin-area business OnRamp: a data center operations company that provides cloud computing, hosting and recovery services. When we think about successful Internet-based companies, we tend to think about the apps we use, such as Facebook and Twitter—and overlook what’s going on behind the scenes that makes those Internet-based apps work. While they may not seem as glamorous as app providers, companies like OnRamp provide the necessary infrastructure for those apps–which can be a great model for success.
In 2009, OnRamp was acquired by Brown Robin Capital, a search fund run by two alumni of the Stanford Graduate School of Business, Ryan Robinson and Lucas Braun. Data Centers aren’t terribly innovative or exciting, but Robinson and Braun are successful and enjoy what they do: in other words, boring is paying off.
The Millionaire Next Door
While boring may not make you famous, it can make you financially successful. In fact, you might be surprised by how many millionaires are owners of local businesses. The number of millionaires in the US is close to 9 million, and is expected to reach nearly 17 million by 2017. Two-thirds of all millionaires are self-employed, and most of these self-made entrepreneurs work in “boring” industries: they are welding contractors, mobile-home park owners, pest controllers and farmers.
Founders of these types of businesses aren’t necessarily innovative in a Steve Jobs sort of way—but they’re good at their job, they typically work hard and they show up every day.
So, you don’t have to have some brilliant new idea—you just need to have a good business model, be good at getting stuff done and make good decisions. Oh, and a little luck helps. If you enjoy hiring and leading people, are motivated by doing things your own way and are comfortable using performance or financial metrics as the benchmarks for achievement, you can be very successful as an entrepreneur. Sometimes, boring is actually pretty awesome.
"A Young Entrepreneur on a Hot Day at Portland State" created by rachaelvoorhees used under CC BY / Resized