It’s probably fitting that Patrick McGinnis is credited with popularizing the term “FOMO.” As a 10% entrepreneur who also works a full-time day job in additional to a handful of entrepreneurial projects, he not missing out on a thing.
Have you ever had entrepreneurial idea but don’t want to leave your day job? Now, you don’t have to. As a 10% entrepreneur, you take 10% of your time (and 10% of your funds) and devoting them to entrepreneurial work. According to Patrick McGinnis, it has the potential to change your life. (And you don’t need millions in your bank account or years of experience.)
Patrick McGinnis sat down with IVY Magazine to talk about his new book The 10% Entrepreneur: Live Your Startup Dream Without Quitting Your Day Job and why he thinks all of us should give 10% entrepreneurship a try. Get an edge on the book and pre-order now!
So many great success stories are of entrepreneurs who do leave everything. How did you have the idea for the 10% entrepreneur?
There is a whole mythology out there, something I like to call “Entrepreneurship, Inc.,” that glamorizes full-time entrepreneurship without showing the real risks—from failure to personal financial distress to the real psychological costs of leaving a stable and prestigious job for very unsure pastures. Anyone whose has ever left a great job to do a startup that no one has ever heard of knows what that feels like—people’s eyes glaze over when you tell them what you do. So even though magazines, blogs, and podcasts make entrepreneurship sound like summer camp, it is not for the faint of heart. The statistics tell us that most new ventures fail, and while everyone likes to lionize the entrepreneurs who run up his or her credit cards before becoming a massive success, no one talks about the other entrepreneur who runs up his credit cards and then never pays them off.
At the same time, traditional careers have their own limitations: Finance is awash in job cuts, pay cuts, and ongoing volatility; 60% of practicing lawyers would not advise young people to enter the industry; and 54% of doctors said they would not choose that career again.
I saw all of these trends and I thought—there’s got to be another way.
One day, I was walking down the street in NYC with my best friend, and he told me a story about one of his mentors, a guy named Stephen Siegel, who runs Global Brokerage at CBRE in New York. Steve is a legend at his job, but he’s just as well known for his huge portfolio of side deals—everything from PJ Clarke’s to a minor league baseball team. He told me that he thought Steve spent around 10% of his time on these ventures and that they brought him lots of upside but also were great fun. That’s when I thought to myself—I’ve got it: The 10% Entrepreneur.
It’s also worth mentioning that being a 10% Entrepreneur is also very relevant for full-time entrepreneurs. These 110% Entrepreneurs, as I call them, need to diversify themselves just as anyone else does. Perhaps even more so, since their day jobs are far riskier in nature.
You’re a 10% entrepreneur yourself. Can you share any of your strategies with us? What does it take to become a 10% entrepreneur?
This book is a direct result of my experience as a refugee from the 2008 financial crisis. I worked at an emerging markets private equity firm that also happened to be a division of AIG. When AIG blew up, it was chaos, no matter the trillion-dollar balance sheet. Our brand became the Scarlet AIG; the government took over and regulated our pay, and our business was put into a paralytic state. In response to that experience, I decided that I would never put all my hopes in one company again—you can do everything right, but when some person you’ve never met in an office you never been to makes a bad bet or a big mistake, you are completely exposed. That’s when I realized that pursuing my new 10% strategy would serve three purposes. First, I would create a Plan B in case I ever found myself in another career blowup. Second, I would generate upside. Third, I would learn how to think like an entrepreneur to the benefit of my day job.
As an added bonus, my 10% has made life far more fun and interesting. I’ve invested at the earliest stages in now highly successful companies like ipsy and Bluesmart. Ipsy recently raised $100 million from TPG Growth and Sherpa Capital, while Bluesmart raised over $2 million in one of the most successful Indiegogo campaigns to date and then went on to join YCombinator. Most recently, I even backed an upcoming stage production of The Last King of Scotland in London’s West End.
The great thing about 10% Entrepreneur is that everyone has their own passions and projects. I include profiles in the book from over 20 10% Entrepreneurs in 9 countries on 4 continents. There are some really amazing stories.
How do you know if your entrepreneurial idea is good or not?
Over the course of my career, I’ve invested in more than twenty businesses and analyzed hundreds more, ranging from Silicon Valley–based startups to larger, more established firms operating in the United States, Latin America, and Asia. Over time, I’ve learned that no matter where a company is located, what it does, or where it is in its growth cycle, deciding whether not to invest comes down to 3 basic due diligence questions, the first two of which won’t be too surprising if you’ve looked at investments in the past.
1. Is the business attractive? Is it positioned for success, and does it operate in an attractive industry?
2. Are your partners, from the investors to the managers, competent and ethical? Are they the right people for the job?
There is a third, additional point, however, that’s not so standard, and this is the one that has saved me countless times over the course of my career.
3. Can you contribute to the success of the company in order to personally increase the value of your investment?
If you cannot provide meaningful insights or make an introduction to a client, key hire, or investor, then you don’t know the company, the industry, or the team well enough to bet on it. In that case, you’re nothing more than a source of cash. This third point is also driven by self-interest. If you can’t help the team, how sure can you be that they will return your calls and look out for your best interests? Founders are busy people, and they can be surprisingly flaky. Once you send in your check, you may never hear from a company again until it’s either sold or liquidated.
At what point do you abandon an entrepreneurial idea if it’s not working? Do you think this timeline is different for a 10% entrepreneur?
Ironically, failure has become harder to “achieve” these days than in the past. Given the falling cost of technology, you can now build and maintain a website for almost nothing. You can also “not fail” and keep a business going, sort of in a zombie like state, indefinitely. Whether you are a 10% Entrepreneur or a 100% Entrepreneur, I fall back to a simple question: is the highest and best use of your time? If you can answer that question affirmatively, keep going. If not, pull the plug or make a hard pivot.
Is finding investors harder or easier (or about the same) for the 10% entrepreneur? (And is it more or less necessary?)
If you’re not full-time, it can be harder to raise capital, at least until you have a team that is working full-time on a project. The good news is that if you’re working your day job, you also have the cash flow to self-fund for a while, which means you can own more of the business for longer and then raise money when you have a proven business model. That means you’ll enjoy better terms and hopefully a better valuation. If you do plan to raise capital at some point, you might find that you’ve reached the right time to transition to full-time entrepreneurship. If you have capital, you can pay yourself a salary, and the whole enterprise becomes far more sustainable.
That’s exactly what Luke Holden, the founder of Luke’s Lobster did. He started the company while working fulltime in investment banking. He got a partner to help him run the day to day and only left when they’d open a second store, and he could pay himself a living wage.
Many people believe we live in an “attention economy” right now, and our ability to focus on tasks is more important than ever. Do you ever wonder if being a 10% entrepreneur might be too distracting? Is there any point when giving only 10% of your time is impossible?
Dedicating 10% of your time is more about mindshare than about the actually hours you set aside. By looking for opportunities that draw on the skills and the network you have already developed in your life and your career, you will be far more efficient. The idea is to find projects that play to your strengths, so that you position yourself for success.
In the book, I profile some very busy people. There’s one amazing guy, Dr Patrick Linnenbank who rose to Partner at Bain & Co. while also practicing medicine by doing a 24-hour rotation in an Amsterdam emergency room every week. On the side, he started his own forensics and security business. His secret? Everything he did built on all the things he did well in the rest of his life. That made it easier to focus and also to succeed.
I also have a few amazing stories about women raising multiple small children while starting 10% endeavors that leverage that experience.
In the end, this is all about mindset. It’s about making room in your life to build something for yourself.
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