Why Businesses Succeed

Many years ago, I consulted for a brief time with a brilliant scientist who had invented a new Personal Protection Equipment product that would truly change the world for healthcare providers and patients.  Every healthcare professional with direct patient contact would want to use the product to avoid infections.  The Inventor/Founder had obtained the necessary patents and developed a prototype to show proof of concept.  At this point, the Founder needed to decide how to monetize the product.  He had three options.  The monetary value and the risk, increase in the order listed below.    

1. Sell the Intellectual Property (IP) or patents to a medical products company and retire.
2. License the technology to a medical products company. As sales and profits grow the Inventor receives a percentage.
3. Raise the capital to fund production, marketing, and distribution to the global market.

The Founder chose number three.  The next step was to raise the capital to manufacture and sell the product.  However, he never got off the launching pad because he was unwilling to share control or ownership.  He could only envision how HIS invention would change the world making him a multi-millionaire.  As I have said many times, some founders are happier with 100% of nothing than 30% of everything.  BTW, Elon Musk is the fourth-largest shareholder of Tesla owning about 3.5% of the company’s stock.

Take Away  

1. The Golden Rule of business. “He or she who has the gold (money), makes the rules.”
2. Recognize one’s value and limitations. Operations, marketing, and financial expertise are essential to success.
3. Founders are often not implementors. They may know the formula for the secret sauce, however, may not have the knowledge and experience for taking a product to market.

Some time ago I was having a conversation with a close friend who at one time had been a managing partner with a private equity fund.  His job was leading the acquisition of companies.  I said I have come to believe that business success is about 20% product or IP and 80% is execution.  He responded by saying, “I agree but it’s more like 1% and 99%.”  Like the example above, if you can’t get the product to market and monetize it, the value is zero.