Startup Lessons From The Beatles’ Relationship With Their Manager

image002Brian Epstein, the Beatles’ Manager, was tenacious and ambitious, but he was musically inept. Brian was instrumental in establishing the Beatles’ career, but he had no input on the band’s production of music. In the same way, investors can be immensely additive to an entrepreneur’s journey, as long as they know the limits of their ability to help.

Effective startup investors guide management’s decision process, but ultimately they support the team’s decisions. If the investors repeatedly disagree with management, they should either disavow themselves from the startup (which is typically difficult for a venture capital firm to do) or make appropriate replacements to the management team. However, they should never attempt to run a company from the sidelines.

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The Beatles’ Biggest Day… So Far

January 1st, 1962 was the biggest day yet in the Beatles’ fledgling career - an audition with Decca Records. However, rather than showcase such high-energy Beatle originals such as, “I Saw Her Standing There” or “The One After 909,” Brian Epstein, the Beatles’ Manager, focused the group’s efforts on sappy show tunes and languid pop standards. The result was a listless audition and the ultimate rejection of the world’s most successful recording act by the otherwise astute Decca.

That was the last time Brian played a major role in the Beatles’ musical direction. As their career progressed, Mr. Epstein focused on what he did well - dealing with the financial aspects of the Beatles’ money machine.

Several years later, Brian made an uncharacteristic visit to the recording studio while the Beatles were creating their landmark album, Sgt. Pepper. During a lull, he made the mistake of offering his unsolicited musical advice, telling John Lennon, "I don't think that sounded quite right”. John didn’t miss a beat, replying, “Slag off Brian. You stick to your percentages and we’ll look after the music.” Brian quietly sulked out of the studio and never returned.

In this instance, John Lennon did what many entrepreneurs fail to do with respect to managing their investors. John made it clear to Brian that the Beatles’ role was to make the product and tend to operations while Brian’s responsibility was to manage the group’s financial solvency.

Seeing Is Not Doing

At the height of their fame, the Beatles were asked, "What excites people so much about your music?" John Lennon replied, "If we knew that, we'd start another group and become managers."

Observing successful execution as an investor is not the same as performing successful execution as an entrepreneur. Just as sports writers are not athletes and theatre critics are not actors, investors are not operators. Thus, act upon your investors’ advice that is drawn from their experience and expertise, but never allow statements like, "I don't think that sounded quite right” to go unchallenged.

You can follow John on Twitter: @johngreathouse.

Photo Credit: Chris Ratcliffe/Bloomberg

 

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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