Why do founders become founders?
There are certainly easier paths to wealth. Like what I do. A good startup investor makes more than a great startup founder eight out of 10 times. I should know — I’ve done both. And I’ve made a lot more investing in founders than trying to be one.
There are many paths that entail fewer hours and less heartache that what founders endure. Develop real estate. Finance a new toll road (Asia offers plenty of these opportunities). Occupy an upper-mid management rung in a Fortune 500 company. Buy ethereum… Or a coal mine. Invest in companies that make your favorite products. Or try to get a job with them.
There are tons of sensible ways to make money in things you’re good at. But being a good founder isn’t one of them. Nothing sensible about it. It’s a crazy, hard, unpredictable, exhausting endeavor. It might make you rich. But don’t count on it.
So what’s the catch? Why do some people insist on going down this obstacle-strewn path? Are they romantics? Gluttons for punishment? Workaholics? Do they have a Messiah complex? An irresistible urge to save the world?
Actually, the explanation is simple. It’s personal. Many founders become founders to right a wrong — and not a wrong they read about in a book or newspaper. This is something they’ve experienced and suffered from first hand.
Most people walk away at that point — either angry, frustrated, sad or defeated. But a tiny minority decides to do something about it. With a little ingenuity and money, they believe the problem can be fixed.
And if enough people have also been harmed or frustrated like they have, the fix can be turned into a business… the businesses into a startup… the startup into an investment opportunity.
And it could be anything. There’s the founder who had trouble getting a mortgage loan. His bank couldn’t accept his crypto savings as collateral without triggering a host of compliance checks. The bank suspected he was involved in illicit activities. Zac Prince (and his wife) was dismayed and frustrated. So he founded BlockFi, a company that makes cash loans using crypto holdings as collateral.
Most of the founders I’ve talked to have similar stories. Richard Uhlig witnessed his son suffer a concussion while playing hockey. His frustration grew as he saw the poor way the medical system handled his son’s injury. So he founded Quadrant Biosciences. It offers the world’s first government-approved saliva test for autism. It’s a huge step forward for kids. And the company is also developing saliva tests to measure the severity and possible ongoing effects of concussions (among other conditions).
Some founders find inspiration from deeply hurtful experiences. A patent attorney worked with a colleague who died of kidney cancer before turning 60. He had no symptoms until the cancer had fully metastasized. The attorney — Jon Cohen — realized better early detection tools were sorely needed and founded 20/20 GeneSystems. It identifies cancer risk early on by using tumor antigen markers and AI.
Cancer was also the reason why Ed Nanale founded Elemeno Health. He had two family members diagnosed with cancer. Both were in and out of a series of hospitals. Ed noticed how much trouble nurses and doctors had in coordinating their care and treatment. Elemeno’s app helps fix this. Nurses and doctors use it to access best practices, videos and checklists that help them make the right decisions as a team.
One successful businessman came to know first hand the devastating effects of opioid addiction. His stepson was addicted for more than 18 years. Bill Crossman left his successful business and became CEO of Phoenix PharmaLabs — a fledgling pharmaceutical company that is developing two completely non-addictive painkillers. He hopes they will be used not only to treat addiction but for serious pain management.
The medical field does not have a monopoly on creating frustration. Chris Yerby was a successful metal scrap trader. In a difficult business where you always have to watch your back, Chris scrupulously checked out every supplier he did business with before making a purchase. But when he paid $150,000 for what turned out to be a pile of junk, he decided that enough was enough. And he founded TradeFox as a company that rewards honesty and openness in the global scrap trading market. Its platform gives scrap traders tools to know each other as easily as if they had done business with each other for years.
The founders of People First HR — Shantanu Rama and Kamael Sugrim — may have more insight than typical on problems startups tackle. People First helps employees who feel they’ve been treated unfairly in the workplace. Shantanu and Kamael say they’ve experienced this issue from both the employee and employer standpoint. Their platform guides employees through an easy-to-follow process that encourages both sides to work together towards a resolution.
These stories engage us as investors. But they also impart extremely valuable information. They speak to founders’ motivation and understanding of the problem. They highlight their resiliency, grounded in the zealous belief that their business is also their mission.
This dedication does not guarantee success. Sometimes, refusing to quit can merely put off the inevitable. But a deep empathy and understanding of the problem can help light the way through the thicket of tough decisions a founder makes on a daily basis. Living to another day and staying the course is of paramount importance. But so is intuiting which course to take. I always want to know what led to a founder’s decision to start a company.
As crazy as the decision is, it always makes sense.