The mythology of American entrepreneurship goes something like this. You research a problem that startlingly nobody has ever noticed. You contrive a solution that your testing demonstrates is attractive and you build a Minimum Viable Product, or MVP. Your value proposition makes your customers an offer they can’t refuse, and in no time your swelling sales allow you to raise millions from venture capital, leading to personal fortune and a few magazine covers.
Dileep Rao, a business professor at Florida International University gathered some surprising facts that make it clear that this is, well, a myth. He points out that VCs fund very few ventures, only about 100 out of 100,000 prospective deals. And only 20 of the 100 prove a success, with just one spectacularly so. So, Dr. Rao concludes, venture capital doesn’t help 99.98% of the companies.
His thesis is that there’s too much emphasis on product, whether on TV’s Shark Tank or in pitch contests or in business schools. What’s really important, he contends, is the not the MVP but the MPE, or Maximum Potential Entrepreneur. That is, someone with the right set of skills to be a better leader than his or her competitors. Most rocket-ship type companies succeed because of management not because their core product was so unique, he says. These crucial skills include product development, sales and financial acumen. And not many people have this combination of abilities.
So maybe the unicorns that investors famously hunt for are the founders not the business concepts.