The Leading Edge - Summer 2009 - 7

development, its needs change dramatically. It suddenly needs a leader who can market the product, build a sales force, support the product and manage complex finances— skills often beyond the founder’s expertise, Wasserman says. Because start-ups usually lack money to invest in hiring employees and building out key aspects of a business plan, they turn to outside investors for help. Wasserman said venture capitalists frequently include explicit CEO-succession clauses before agreeing to invest—which suggests they’re predisposed to replacing the founder. “In this paradox of success, founderCEOs who are successful either at leading their companies to … completion of product development or at raising a round of financing have a higher rate of turnover,” Wasserman’s 2003 research concludes. Can’t entrepreneurs be both rich and king? It’s rare, Wasserman says, reeling off a short list of entrepreneurs who achieved both, including Microsoft’s Bill Gates, Dell’s Michael Dell and Nike’s Phil Knight. “They’re famous because they are the exception,” he says. THE TWo MoST CRITICAL junCTuRES FoR FounDInG EnTREPREnEuRS ARE AT CoMPLETIon oF PRoDuCT DEvELoPMEnT AnD WHEn IT’S nECESSARy To RAISE A nEW RounD oF FInAnCInG. was no company and, more importantly, no revenue stream. Solovic began assembling her team. She had a TV news background but didn’t know anything about running a Web site. She also didn’t like sales. She first brought on a partner with a sales background then hired someone with a technology background. “As an organization grows, the entrepreneur has a tendency to think they need to have their finger in on everything or it isn’t going to be good enough,” she says. “No one has all the skills it takes, and if you want to build a legacy, then you have to let go.” In 2004, Solovic and her small team officially launched SBTV.com. Her concept was to create an Internet television network—a “CNBC for small business.” “I wanted to build a brand that had a personality because small business owners often feel isolated when they’re sitting at their desks at midnight trying to figure out how they’re going to meet payroll,” she says. SBTV.com’s “sweet spot” is a business with less than $1 million in revenue, fewer than 25 employees and in existence about five years. The site features news that explains the impact on small business owners, articles written by experts and other user-generated material. It also recently started a section called “Reinvent Your Career,” with information geared toward helping downsized workers transform themselves into business owners. The site became profitable in July 2006 and expects to surpass $3 million in revenue this year, up from $2 million a year ago. About 90 percent of the site’s revenue is from advertising. Since it started as a Web site, SBTV.com doesn’t have the infrastructure costs dragging down a lot of print and TV news operations. It has grown to 23 employees working in editorial, production, marketing and sales in St. Louis. Solovic flirted with venture capital funding in 2006, signing a term sheet with a Silicon Valley company. But she and her partners walked away from the deal in 2007 after continued on page 8 growing organically Susan Wilson Solovic is one entrepreneur who’s building her company on her own. As a former broadcast journalist from an entrepreneurial family, she thinks there’s a need for news tailored to small business owners. A conversation in 2003 resulted in Solovic buying a friend’s small business television Web site, SBTV.com. What she got was an Internet domain—there Total u.s. investments by venture Capitalists Quarter 2006 # of deals amount invested # of deals amount invested # of deals amount invested 1 875 $6,351,946,400 869 $7,531,731,400 997 $7,741,262,700 2 963 $7,111,243,900 1,043 $7,382,397,800 1,051 $7,572,826,200 3 909 $6,649,449,600 997 $7,866,519,900 970 $7,256,024,100 4 949 $6,372,607,200 1,058 $8,060,046,300 866 $5,657,431,800 grand Total 3,696 $26,485,247,100 3,967 $30,840,695,400 3,884 $28,227,544,800 7 2007 2008 Source: PriceWaterhouseCoopers/National Venture Capital Association ThE LEadIng EdgE

The Leading Edge - Summer 2009

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