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The One Reason Startups Fail, with VentureSouth's Charlie Banks

As a child, Charlie Banks dreamt of becoming a sports agent. His father was a lawyer, he studied hard and took the Law School Admissions Test and he was ready to apply for school.

Then, he got a taste of entrepreneurship and investing. He was hooked.

“I guess it was timing and luck more than anything,” Charlie said. “ I got involved in some real estate investments, made some money in that and started making bets on companies that I just thought were interesting, on entrepreneurs that were doing some cool stuff.”

Some of his early investments were successful, and some were not. But all of those early investments taught him something.“Looking back on that time, it was really just about educating myself on what not to do,” Charlie said.

Now, Charlie uses that expertise in his role as managing director at VentureSouth, an early-stage venture firm that provides capital to startups with its angel investment network and funds throughout the Southeast. The firm has invested $60 million in 90 companies to date, and Charlie helps create a lot more successes than he saw in his early days.

“We backed a young team that took an idea they had in college and turned it into a successful business,” Charlie said. “And we were able to watch the matriculation all the way from inception and idea and, you know, senior thesis, all the way through a massive multi-million dollar exit.”

But Charlie said successes like that only happen when founders are both confident and coachable. They need to be sure of the value of their product and ready to listen and learn from their investors—and their investors’ mistakes. The mentorship piece is critical for the success of the business and mindset of the founder.

“Entrepreneurs are inherently egotistical maniacs,” Charlie said. “They think they're gonna solve the world, and most of them do solve the world. But when you balance that with understanding this maniacal approach to building a career and combine that with coaching and make something great out of it, that’s what's so fascinating about entrepreneurship and angel investments.”

VentureSouth is open to any of these world-solving companies, but its investors primarily focus on the tech-enabled space, which allows exits in a more reasonable and predictable timeline.

In the last few years, though, our world has been anything but predictable. But Charlie doesn’t let that discourage founders from going after their great ideas.

“Historically, some of the most successful companies in the world have been started in peculiar economic times,” Charlie said. “You look back at the post-2008 timeframe, and you've got folks who made a tremendous amount of money back in companies that were started in that recession.”

Still, Charlie said that all companies fail for one reason alone. To find out, tune in to his episode of the Founder Shares podcast, available wherever you like to listen.