By Cynthia Kocialski
Everyone wants to believe this time is different. That nothing stays the same and somehow the world has changed. Is it really so different? Are the experiences of today’s entrepreneurs dissimilar from those of yesterday? Let’s step back in time and take a look at Christopher Columbus through the eyes of today’s entrepreneurs and start-ups. Columbus was an explorer and an adventurer, but today he may simply have been called an entrepreneur.
Christopher Columbus was born around 1451 to a father, who worked in the textile industry as a wool comber, and was of small means.
Today’s Perspective: Christopher Columbus was not well-connected and he had to build his professional network to achieve his goals. Certainly, funding was not to be found among family and friends of his early childhood.
Columbus spent his youth sailing on small vessels. In one of his writings, Columbus claims to have gone to the sea at the age of 10. Yet, a seemingly contradictory statement by the admiral has him becoming a sailor at 14. In the early 1470s, he served on a Genoese ship associated with the failed attempt to conquer the Kingdom of Naples. However, during the same years of 1470 – 1473 he can be found following the family business of weaving. In May 1476, he sailed on a convoy attacked by a privateer – two of the four ships escaped. His voyages continued into northern Europe. In 1479, Columbus settled in Portugal, where he worked with his brother as a mapmaker.
Today’s Perspective: Christopher Columbus had some experience in his industry. His resume is spotty. Nothing stands out or demonstrates any remarkable abilities at this point. Being a part of some failed or disastrous voyages is not optimal for asking investors for funding in later years.
In 1478, he married a lady of some rank, Felipa Moñiz de Perestrello, daughter of Bartholomew Perestrello, a captain in the service of Prince Henry the Navigator, and also cousin of the archbishop of Lisbon.
Today’s Perspective: Now here’s some potential to get family and friends as investors, or at the very least, the ability to make some introductions and connections to those institutional investors (monarchs) and the super angels (noblemen).
Identifying the Problem and Need
In 1453, the Ottoman Turks took over the land-based trade routes to Asia, which made travel through the region dangerous and difficult. Thus, there arose the urgent need to discover a new sea route to reach India and China – vital sources of silk, spices and opiates.
Today’s Perspective: The political winds changed, causing profits to be curtailed from a sole source supplier with no other geographic location being able to provide suitable replacements. There we have it: customers desperately seeking a solution to an urgent problem. Over the decades, I’m sure they tried other solutions, but apparently none were adequate. And where there is profit, there is progress, and the greater the profit, the greater the progress and the greater the funding to create the progress. Here the investors were trying to solve a big problem.
The Product Concept
How Columbus arrived at his idea is not known, and many of the details are disputed. It is said that while working as a mapmaker, he came in contact with many mariners and seamen. There were books written about previous exploration to the east. He is said to have corresponded with some of the thought leaders of the day concerning his proposal.
Today’s Perspective: Columbus had a spark. He didn’t take a half-baked idea directly to the investors. He spent some time researching it, discussing its points with those current day experts – the mariners that required maps, and corresponding with the thinkers of the day. He refined his idea and proposal. Columbus’ investment community was rather small. There were only a few that could afford to fund his proposal, likewise there simply aren’t a huge number of venture capitalists today and word gets around quickly.
Columbus knew like the rest of the explorers of that day that the earth was spherical and one could reach the east. In 1485, Columbus presented his plans to the King of Portugal. He proposed the king provide three ships and grant Columbus one year to sail west into the Atlantic to search for a route to Asia. The king submitted the proposal to his experts, who rejected it. In their opinion, Columbus’ proposed route of 2,400 miles was far too short.
Although the king’s council was negative, the king was yet inclined to favor the theory of Columbus. The king brought the proposal to the bishop of Ceuta, who suggested the plan be carried out in secret and without its author’s knowledge. A ship was dispatched, but it returned shortly after beginning its voyage as the sailors lost heart and refused to venture farther.
Today’s Perspective: It would be a miracle today if an unknown and unproven entrepreneur could secure major funding from the first investor meeting. The king did exactly what the venture capitalists and angel investors do today; they validate the technical aspects of the proposal through their network of experts in a broad range of fields. In Columbus’ case, the experts weighed in with serious concerns about the technical merits of his proposal – and rightly so. Columbus’ lack of experience in sailing made him underestimate the circumference of the earth – and this one error was enough to cast doubt on what else was wrong.
As to the secret voyage, well … that’s when investors like the idea, but don’t like the entrepreneur. It’s when investors feel they want to appoint a more suitable management team. In Columbus’ case, the investors didn’t feel he would be adding much to the execution phase.
In 1488, Columbus approached the King of Portugal once again, and again it came to nothing.
Henry the Navigator had revived an old proposal for Portugal to pursue a sea route around the southern tip of Africa. In 1487, the Portuguese mariner Bartholomeu Dias set sail to round the Horn of Africa. In late 1488, shortly after Columbus’ second meeting, Dias successfully returned and Portugal was no longer interested in seeking a westward sea route to Asia.
Today’s Perspective: The investors liked Columbus’ proposal, they tried it, but it didn’t work. So they sought a solution elsewhere and chose to fund a solution that was proposed by a successful and proven mariner – Prince Henry the Navigator. The entrepreneur’s proposal is never the only one being presented to the investor; there will be many. An investor can like the idea, but then they have to select the team with the best chance of success.
Once Portugal had solved its problem, it was time to seek funding elsewhere, perhaps with a competitor.
Persistence and Searching Harder for an Investor
Columbus had difficulty finding funding for his voyage. Many of his proposals were rejected by the various European monarchs. While presenting his proposal to the monarchs, he continued to meet with noblemen, seeking their advice, and help in securing connections and funding. Columbus persisted as the royal experts debated his proposal and subsequently denied its merits. There were moments when Columbus is reported to have fallen into deep despair. When he presented his proposal to Ferdinand and Isabella of Spain, it received the same ill-fated response. Some moments were poorly timed, as the Spanish monarchs were in the middle of a struggle that resulted in the conquest of the Granada Moors. However, the Spanish monarchs offered him an annual allowance and provided him food and lodging at no cost in all cities and towns under their control, just to keep him from taking his proposal to someone else.
Queen Isabella rejected Columbus’s plan three times before changing her mind. Columbus’ terms – the position of Admiral, governorship for him and his descendants of discovered lands, and ten percent of the profits for all trips made by Spain to the new lands, for all time. Finally in 1492, the monarchs approved his proposal and helped him set sail. In August, his expedition departed and arrived in America on October 12. Columbus stumbled upon America. He returned the next year and presented his findings to the monarchs, and Spain entered a Golden Age.
Today’s Perspective: Persistence matters a great deal in the start-up game. Unless you’ve got a spectacular track record, funding won’t happen quickly – not in a week, not in a month. Entrepreneurs have to persist for some time and there will be those times when the entrepreneurs wonder why they are doing it. Cisco was rejected by 77 VC’s before securing funding and it was near a 1,000 rejections for Colonel Sanders of KFC. It takes a strong ego to survive that much rejection.
Timing is everything in capital markets. If the entrepreneur is seeking funding from venture capitalists, private equity firms, angel investors or just about any kind of outside funding, it is all somehow connected to the capital markets. In Columbus’ case, it was the struggles between countries and empires.
The Spanish monarchs essentially put a no-shopping gag on Columbus – they paid him not to take his proposal elsewhere. This is green-mail. The venture capital business is highly competitive. Every venture capital firm has to have their portfolio start-ups in a hot trend.
Once Portugal had a sea route around the Horn of Africa, Ferdinand and Isabella had to find a route to the East in order to keep their competitor from grabbing the lion share of the market. Hence, their sudden interest in Columbus and willingness to accept his terms. In today’s terms, Columbus demanded to be CEO and locked in a succession plan for his children to be appointed CEO, he and his family were to receive 10% of corporate profits forever – equity was out of the question, but salary and profit sharing seemed acceptable to the monarchs. To have demanded those terms for the monarchs, Columbus must have been quite an ambitious man. Imagine the response a first-time entrepreneur, with no track record of success, would get from a VC today with those terms.
Founders Can’t Often Transition
So Christopher Columbus found what he sought. This made him an accomplished explorer. However, he was a disastrous and horrible governor.
Today’s Perspective: Not many founders can change and provide the leadership a company needs as it grows. Founders and early management teams are typically good in the beginning, but not effective at the later stages. It’s common to see a management shake-up. There’s a big difference between operating a company of less than 100 employees, a company of 5,000 employees, and a corporation of 100,000 employees. In the beginning, a company is centered upon the creation of everything from the product, to the way the company does business, to company culture. As it ages, it becomes more about process improvement and efficiency. It turns from being focused outward to inward. Each of the different stages of a company’s existence often requires different type of individuals to steer and guide it.
If Columbus lived today and was an entrepreneur, it’s unlikely he would have been governor at all. His role would have stopped soon after the discovery of the trade route, at which time he would have been relegated to the traditional executive vice president’s role.
The world is not so different today than 500 years ago. Technology advances as we further the improvements and discoveries of previous generations, but how people behavior and react has not changed at all.
About the Author
Cynthia Kocialski is the founder of three tech start-ups companies. In the past 15 years, she has been involved in dozens of start-ups. Cynthia writes the Start-up Entrepreneurs’ Blog (www.cynthiakocialski.com) and has written the book, “Startup From The Ground Up – Practical Insights for Entrepreneurs, How to Go from an Idea to New Business” (www.startupfromthegroundup.com).