For some entrepreneurs, starting a business coincides with leaving the corporate world. These founders dive headfirst into self-employment and devote all of their waking hours to nurturing and growing their new companies.
This wasn't the case for Patrick McGinnis. In his book, "The 10% Entrepreneur: Live Your Startup Dream Without Quitting Your Day Job" (Portfolio, 2016), the venture capitalist and former Wall Streeter explains why and how he started his business while still employed full-time.
We talked to McGinnis, the founder of investment and advisory firm Dirigo Advisors, about the costs and benefits of part-time entrepreneurship.
What should readers know about your background on this topic?
Patrick McGinnis: I learned the hard way that having one job wasn't enough. I was working on Wall Street [at AIG], moving up the corporate ladder in a job I liked and that paid me well. Then, in 2008, AIG [received a government bailout], and my group … was put up for sale.
When the AIG bonus scandal took place … I realized that my résumé, which I had worked hard to stuff with all the right brands, now had a scarlet AIG at the top. It was an eye-opening experience for me. I decided I needed to be more diversified and do things on the side.
Some friends showed me a couple of [investment] opportunities that fit my experience, and I liked it. I started not just investing but [also] advising, exchanging my time for sweat equity. Then I worked on starting some things and putting together real estate deals. Now, five years later, I have a portfolio of 15 investments that are worth well over 15 times the amount I put into them. And it's been really enjoyable.
So what is a 10 percent entrepreneur?
McGinnis: A 10 percent entrepreneur is somebody who dedicates at least 10 percent of his or her time and, if possible, 10 percent of his or her money to invest in, advise and start new ventures.
Are these necessarily the entrepreneur's own ventures?
McGinnis: Not necessarily. Maybe you know someone who's starting a new business, and you provide capital or expertise. Or you could start your own thing as well. The idea is ownership. It's not a freelancing kind of thing. It's about being an owner and building long-term value that you can take with you wherever you go.
Why would somebody want to be a 10 percent entrepreneur as opposed to a 100 percent entrepreneur?
McGinnis: Full-time entrepreneurship is great, but it's not for everybody. It's risky, [especially] if you have a mortgage and kids, or if you're somebody who's just not a risk-taker. Being a 10 percent entrepreneur allows you to be entrepreneurial, but on your own terms and matching your own risk profile. Plus, statistics say it works. A study by [the] University of Wisconsin-Madison showed that people who engage in a venture on a part-time basis are 33 percent less likely to fail than people who just quit their jobs and do a startup full time.
You'd think 100 percent entrepreneurs would be more successful. What is it about 10 percent?
McGinnis: With 10 percent [entrepreneurship], you have the luxury of time to see if something works. If you are a full-time entrepreneur, it's a one-shot deal. You don't have the flexibility to experiment, try different things, and figure out if something works and get the right business model before jumping in full time.
What about the downside? Is it more difficult? Does it take more investment of your time to keep your job and be a 10 percent entrepreneur?
McGinnis: It's a matter of mind-set. The critical thing is to pick projects that fit with your life. If you have limited time, you are probably better off getting involved as an investor or advisor, investing either cash or some of your time in exchange for an ownership stake. If you're successful and your business starts to take off, you're going to get to the point where you need to bring in a partner to help you, or consider whether you want to go full time as an entrepreneur.
One person I interviewed [for my book] is a full-time lawyer who started a company that makes bracelets that play school fight songs. He works long hours, but this is his fun time. He says it's not just a job, it's a passion.
So you should pick something that is enjoyable?
McGinnis: That is the difference between this and a passive income [project]. This is more about doing things you really enjoy. You're trying to find projects that match what you're good at and what you're interested in.
Are there particular risks people need to watch out for?
McGinnis: Absolutely. The first one is you need to respect your employer and your day job and make sure you follow the rules. If they tell you to do something, do it. And never use work resources. Don't make photocopies with the work copiers. Don't use work emails. Be respectful of the fact that you're doing something for yourself.
Number two, recognize where you need to learn. For example, if you want to be an angel investor, you need to learn how to do that. And don't do things just because of momentum. You need a process. In the book, I lay out a process to find the right project. That's critical. You want to make sure you are smart about what you choose to do.
Do you think this something that's going to happen more often?
McGinnis: I interviewed 30 people in nine countries and four continents who are all doing this. These are people who started in the last couple of years, so it's a recent phenomenon, and I think we're going to see more of it. And it's all kinds of people. It's the car dealer who started a brewery, the mom who works at a fashion company and started a children's clothing line, the tech entrepreneur who also has a dating app he's building on the side. It's all kinds of different people. That's what's so exciting about it.