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If you have ever considered launching a startup, you may feel that it requires an all-in, 100% percent focus, which would mean leaving a full-time job. A new book by Patrick McGinnis, venture capitalist and founder of Dirigo Advisors, argues that all you need is 10% of your spare time to become an entrepreneur. Patrick stopped by the Knowledge@Wharton Show on Sirius XM channel 111 to talk about the book, The 10% Entrepreneur.
Knowledge@Wharton: How did you arrive at 10%?
Patrick McGinnis: I did this myself. I was the guy bumbling around in the dark room looking for the light switch in my own life. I came out of this experience where my career went into upheaval, and I was looking for diversification. I started thinking, “What’s an appropriate amount of time to spend on things outside of my day job that is meaningful but achievable?” I started at 20%. I thought, that feels like a lot — let me get down to 10%. Over time, I found out that the average angel investor invests 10% of their net worth in side ventures.
Knowledge@Wharton: How many potential entrepreneurs do you think are scared away because they feel like they are sticking their neck out there, that they have to go 100% or they can’t go at all?
McGinnis: It’s a substantial number of people. I think about the business community and friends I know who are working in law firms or banks or corporate jobs. How many of them look at what’s going on in entrepreneurship and say, “Well, I’d love to do that. My next door neighbor’s kid is 24 and has a startup and has raised $5 million.”
“You can start in your basement with a home brewing kit that doesn’t cost a lot of money…. Over time, as you build your brand using social media, which is also basically free, you get going.”
Or even something much smaller: “I’ve always wanted to run a restaurant,” or something like that. They look at that and say, “It’s great, but I have a good job. I’m doing something that I always wanted to do. I’m not going to give all that up for the rollercoaster that is entrepreneurship.” I think it’s actually quite pervasive. As I’ve talked to people about the book, I’ve been shocked at how many people throughout society are struggling with this dilemma.
Knowledge@Wharton: Is the idea to try and use these entrepreneurial ventures as a safety net or a backup?
McGinnis: Well, it can be. We obviously live in volatile times. I came up with this idea because of [the recession in] 2008…. Things [can] go wrong on the global scale. Your job could be gone. I wanted people to think about how to diversify themselves away from their day jobs. At the same time, we live in a time when entrepreneurship has become a big business, so if you aren’t participating in the new economy in one way or another, you’re missing out on an opportunity to take part in a really significant upside.
Knowledge@Wharton: You bring up a couple of different ideas for segments of the business community that really lend themselves to being a 10% entrepreneur. I’ve got a couple friends working in the craft beer industry who are more on a full-time basis, but they started out part time. That’s an industry that has really played itself into this type of 10% possibility, correct?
McGinnis: It really has. It’s one of those industries where the barriers to entry, in terms of capital, are quite low. You can start in your basement with a home brewing kit that doesn’t cost a lot of money. You can get it on Amazon, and you can actually build a business, bottle by bottle by bottle. Then, over time, as you build your brand using social media, which is also basically free, you get going. I found three companies in my research for the book. I ended up profiling two, but this is an industry that’s really taken off. This is going to play out in other industries where, because of technology and because of all of the tools that we have at our disposal, you can really start something from nothing.
“There’s this mythology and culture around entrepreneurship that’s like if you’re not eating ramen and living in a box on the side of the road, you’re not committed.”
Knowledge@Wharton: When you tell people 10% is all you need, how many say that doesn’t seem like a lot?
McGinnis: There’s this mythology and culture around entrepreneurship that’s like if you’re not eating ramen and living in a box on the side of the road, you’re not committed, right? That certainly is a viable path for some people who have savings or family to back them up. But for the rest of us, 10% is a place to start. It may go to 100% or 110%, but it’s a place to start to figure out, do you like doing entrepreneurship? Is it something that appeals to you? Does your business idea make sense? As a 10% entrepreneur, oftentimes the way you get started is by investing or advising the ventures of others, so you are playing a side role and maybe you start something on the side and scale it up. But the idea is that it’s really an access point. So 10% can be enough, but it also may be that you find that you love it. You have a great idea and you have promise and then you scale up beyond that.
Knowledge@Wharton: You talk in the book about kind of five different types of entrepreneurs.
McGinnis: Yes, there are five types of 10% entrepreneurs, and each one will be tailored to you. You can be more than one, of course. You choose your path based on your resources and the time and the capital and the knowledge and relationships you have.
[They include] the angel investor. Next is an advisor where, instead of investing capital, you invest your time for a stake. The third is being a founder, operating something that you started on the side. Fourth is an aficionado, which is you have a passion and you want to do that; it’s not necessarily 100% profit driven. I also love to cook and I want to invest in a restaurant and cook there. The final is the 110% entrepreneur, and that’s somebody who is already an entrepreneur and has made that big concentrated bet, and says, “I want to use 10% entrepreneurship to diversify myself because I realize that entrepreneurship is high risk, and I want to have other things going on the side.”
“Any industry where you can get going and you can do it in a highly flexible manner, in which you don’t need a ton of capital, really lends itself to 10% entrepreneurship.”
Knowledge@Wharton: We mentioned the beer industry as being a segment that really plays into being a 10% entrepreneur. Are there other sectors out there that are leaning that way right now?
McGinnis: Any industry where you can get going and you can do it in a highly flexible manner, in which you don’t need a ton of capital, really lends itself to 10% entrepreneurship. You can build a website for basically nothing because of the online tools. Anything where you are trying to reach a consumer that way. People do this with Etsy stores that evolve into their own online shop. Those are the types of things where it’s the easiest, but I’ve also seen people — for example, we had a really great story in the book about a woman who has a company called Masala Baby and it’s children’s clothes and that started out in her basement and is now all over the country, actually in hundreds of stores, so I think it just depends on finding an industry that you can scale in a rational way.