The success equation or why an entrepreneur was right when he said, “We don’t always listen to you.”

Greg Kemp, founder, and CEO of Torad Engineering told me, “This may surprise you. We always listen to what you say but don’t always do what you say. “ Sixteen years later, we are still in business together.

Over those sixteen years, there has been a lot of contention and disagreement. There was also a lot of agreement. As an early-stage investor, my job is to help formulate the initial strategy and hold the entrepreneur accountable to the agreed strategy. This works best in the early stages of the investment. As the months turn into years, my influence on strategy recedes.

The entrepreneur is in the market every day. I’m not.

I remember a story Bill Nussey, a successful Atlanta entrepreneur, told to an entrepreneur audience. He was being considered as a partner for a notable VC firm. The managing partner gave him a tour of the office. They walked past tombstone after tombstone of the VC firm’s successful investments.

At one point, the partner asked, “Do you know how many of these investments still focused on their original strategy?”

The answer, as you may have guessed, is “None.”

And this is what happened to me and my investments. The longer the company stays in business, the better the entrepreneur understands the market. This on-the-ground experience leads to more nuanced insights into the yet-undiscovered problems in the market. These problems lead to the real strategy for the business. Solve these problems, and you build real value.

As an early-stage investor, there is no way for me to uncover this market opportunity. I’m not in the market. He is. The entrepreneur knows, really knows. All I can do is speculate and continue to test the entrepreneur’s assumptions that lead to the pivot in strategy. In other words, I go from a strategy contributor to a sounding board for the new strategy.

Three ingredients must be present from day one of the startup for it even has a chance to succeed. Then the entrepreneur must demonstrate personal growth. And lastly, an investor smarter than me needs to take over as the entrepreneur’s new finance partner. Allow me to explain.

The ingredients

Ingredient #1 - The entrepreneur

God must call the entrepreneur to do this. The person might not even believe in God, but I know they have to do this when I meet them. And they have to do it because they tell me how this idea came to them. They share a compelling story. And their story brings it all together. It answers my questions: Why you ? and Why you right now?

Greg Kemp is a serial entrepreneur. He was built for it. After meeting him at a workplace Bible study, I was amazed at how he found market problems. He did not define a problem quickly. He would solve it with technology over a weekend. That’s right. He never put together a PowerPoint presentation. He built solutions he could demonstrate. The guy is incredible.

I invested in Torad because of this crazy story he told me one day after the Bible study concluded. He said, “While I was taking the garbage out to my garage, I got a clear vision for a new internal combustion engine. I saw it working.”

When he first told me the story of his vision, I said something like, “Isn’t that nice.”

But he kept working to think through the design of what he saw. It started with sketches and progressed to mechanical plans. Week by week, I saw him make progress on the design. I eventually provided funding to begin advancing it in earnest. He eventually progressed to cutting metal and assembling the compressor, which was the beginning of an engine.

I leaped into investing because I was convinced God called Greg, and this was his time. He was the right entrepreneur.

Ingredient #2 - Uncovered an intuitively obvious market problem.

The internal combustion engine we all grew up with is inefficient. Even after all these years of development, only 33% of the energy used translates into usable work. He thought his design could improve this to over 50%, which would be mind-blowing to the industry and market.

I wondered, could he solve this?

Ingredient #3 - Requisite expertise to define a unique solution.

Greg was, is, a genius. We spent a lot of time together during the first year we met. He was more than bright. And he had a mechanical engineering degree from Illinois. He graduated with high honors.

He was also the guy that worked on the family cars. He liked solving complex mechanical problems. He liked using his hands. There was no mechanical issue too difficult for him to solve. The guy was McIver.

I was convinced if anyone could solve this problem cost-efficiently, he could.

Requirement #1 - The entrepreneur’s personal growth

Every entrepreneur I got involved with had three ingredients. But not every entrepreneur demonstrates personal growth. Entrepreneurs are more than calling and expertise. They are, first and foremost, people. And as people, they have childhood experiences and life experiences they learned to cope with as adults. But their coping mechanisms, which are usually unhealthy, must be addressed at some point. This is not the investor’s job. Although they might help, it is the entrepreneur’s responsibility.

These may include addictions, anger, lack of transparency, insecurities, and many others. Growth begins when coping mechanisms are recognized as protection from underlying issues. And this growth makes for a better person, spouse, father, and business leader.

And these honest self-assessments and sharing create trust. Trust with employees, customers, and investors.

Requirement #2 - A more intelligent investor than me shows up

These three ingredients, plus personal growth, begin the process of stripping away ego and opening the door to building real value. A mature leader leads the company with amazing expertise and market experience. And this is when the real market problem is discovered.

In the case of Torad Engineering and its founder, Greg Kemp, he discovered the new engine to be a non-starter. The real market need was a compressor that could efficiently compress low-density, environmentally friendly gas.

This breakthrough attracted some very smart investors. They understood the uniqueness of the design. They were excited about the promise of Zero Co2 in the HVAC market. The potential is for a solution to solve the global warming problem on a large scale worldwide.

And they are doing it!

So when Greg told me he doesn’t always listen to me, it showed me all we’ve been through. His growth, my growth, and the market need. He summed it up in one statement.

He is the right entrepreneur.

Now it is all about execution.

The right entrepreneur

uncovered an intuitively obvious market problem

with the requisite expertise to define a unique solution and

build trust in his leadership, then

a smarter investor than me shows up

to continue the progress.