Over the last three weeks, we have shared the lessons of liquidity, of outliers, and of leadership and luck we've learned from the stories of the extraordinary returns earned by Facebook's early investors.
But what about when things don’t work out?
When our early-stage private equity investments are stuck in illiquidity?
When growth is not progressing on that hoped for outlier path?
When the invested-in company - in spite of its leaders’ best efforts - just keep getting hit over the head with big, gooping dollops of bad luck?
What - in these oh so frustrating circumstances - is an investor to do?
Well, the first place to start is to recognize - for better or for worse - that this is the typical scenario.
The vast majority of companies are not Facebook, and the vast majority of investments of course do not have multi-thousand percent returns in just a few short years.
While most investors recognize this point intellectually, emotionally it is often a far different story.
This dichotomy flows from the basic nature of most entrepreneurs and of the fundraising process.
For starters, entrepreneurs are optimists of the highest order. It is what makes them special and why we love them so.
Then, the process of raising money for a company is fundamentally a sales undertaking.
One where the entrepreneur's fundamental optimism is combined with the necessity of promoting - with great persistence and passion - the brilliant investment prospects for his or her business.
From this highly positive charged state, money is invested and expectations are set high.
And then, real life and business return.
Characterized of course more often than not by long slogs. By unforeseen obstacles. And by just plain old - fashioned bad luck.
And investors naturally become disappointed, impatient, and often angry, too.
And then, for better or for worse, they often lash out at their once so-favored entrepreneur.
These of course are not pleasant emotions, but a key purpose they can serve is to test the entrepreneurs mettle.
As investors make their frustrated voices heard, how does the entrepreneur react?
Is he or she defensive? Defiant? Pollyanna? Inaccessible?
Is he or she able to channel the frustration into positive, moving forward energy?
Into - as is often found in the highest character entrepreneurs - a deeper, abiding, and more sober commitment to make investors whole?
Quite simply, is he or she able to stand in the center of the storm and keep both feet firmly planted on the ground and eyes firmly fixed on the prize?
When the heat is turned up high, the entrepreneurs that behave like this…
…well they are the straws that truly stir the drink of our capitalistic economy.
Very rarely because of simple probabilities will they build a Facebook.
And they won't be successful with every company they lead.
But with them, the odds are well in investors' favor of doing far better than average.
So when investing times get tough - as they often do - discovering that you have backed an entrepreneur like this is the kind of luck that every investor hopes and deserves to have.