In the first place, I am a pretty skeptical person. This has been further enhanced by my 4 (5?) years in engineering school, where you quickly learn to drill down into the numbers about whether the thing will hold your weight or explode into your face. The bridge will collapse or the reactor will blow. There are no 2 ways about it.
The funny thing about introducing yourself as a startup co-founder is that you suddenly get pitched a lot (not as much as a VC, I'm sure) about new potential business ideas and partnerships. Well, I guess that's karma for having pitched stupid ideas to other people.. (Oops..) Now, I think our small team has gained a little bit of credibility just because we're still hanging around after 1 year. The internal joke among our team is that we are the cockroaches.. =p We try not to die by keeping our burn rate low and trying stuff out to see if it works (www.paulgraham.com/die.html).
Having blown away the smoke (social media guru.. cough cough), I tend to fall back on some wise words that many experienced businessmen/businesswomen once told us.
"It's 'Revenues - Costs'. Nothing else matters." I don't really care about what your idea is, as long as you quantify the additional sales it brings or the costs savings it will bring to the potential customers. If it's so fantastic, it should also have at least 1 client already committed to paying. If I see/hear unicorns and fairies, I'm riding my magic carpet out.
The other thing is that, I should be impressed by how well you know the industry surrounding the idea you are pitching. I should not know more people within the industry or more about how the industry operates than you.
Coincidentally, it seems that our team also follows a simple division of labour. We are either making the product or selling the product. Nothing else matters. There are no "idea" guys. Like my prof said, there is no market for ideas.
I'm also pretty convinced that there's no smart way or shortcut to do stuff most of the time. Just do it the hard way, and it almost always turns out to be the smart way. If all else fails, and the competition is more entrenched, has more resources, is smarter, than the only recourse is to work harder.
Customers are not users. Users are not customers. Customers are defined as people who pay you money. Period. If you can find users but can't find customers, you screwed. Customers are also defined as people that you can help in 2 ways: either add to their revenues or lower their costs. If that happens, they are extremely happy to pay you for your hard work.
A competitive advantage is not something theoretical from Porter's 5 Forces. A competitive advantage in reality is:
- Something that lets them do things faster, better and cheaper than you (the FBC test)
- A larger sales force (which means they can cover more ground than you) and that they can spend more time talking to each customer, making your customers feel highly valued
- A larger marketing budget, which means they can place advertisements left, right and centre in industry publications, conferences and on all the media channels
- More knowledge of the industry, which means they know the shortcuts which costs you effort, time and money to learn
- Insider knowledge - Nothing sneaky or underhanded, it just means that they might get wind of certain movements such as regulatory changes or someone having a large budget to spend in 1 week's time
- More experience in the industry, which means they know more people who have a business relationship with them, whom they can ally with to kill you off
- A more established reputation, which may translate to better credit terms, better discounts and preferential delivery
- More cashflow, which means they can kill you with a price war
- More assets, which means better financing terms
- A prettier or more attractive sales force (ever wondered why all the ice cream shops, dessert places, yogurt cafes almost ubiquitously have young servers? Or why the male private bankers all seem to be models in their previous lifetime?)
- A longer list of marque clients, whom will attract more marque clients, whom will attract more marque clients.. to infinity
- Infrastructure that is more efficient in delivering products/services to customers quicker and at a cheaper cost
- Better customer service, both before sales and after sales (after sales service translates to repeat customers and referrals, something which many don't grasp)
I'm also interested in understanding how people think they can start businesses if they can't convince themselves to survive on half their paycheck and not prepare enough cash reserves for 18 months of living expenses, just in case no revenues come in for 1.5 years.
There's nothing really for free. There is something called social capital, and it's hard earned capital. You better be doing a lot of favours for people around you, because you're not going to get much help when you need favours or introductions back. If you have been introduced by a friend, please don't cut out the person who made the introduction. The person making the introduction probably does not want anything from you, but just wants to be cc-ed at least for the first email just to ensure that contact has been made. If you are being introduced, make it easy for the person doing the introduction by writing a short introductory paragraph and be specific about what you need help for. Thank the person making the introduction in the email thread and remember to treat him/her a drink or a small box of chocolates/tea/something healthy.
It could be just timing, the wrong team or wrong execution. If it does not work for 2-3 years, just man (woman) up and try something different. A successful entrepreneur probably tries more than 10 businesses or project in his/her lifetime, and not all of them will succeed. So everyone has a failure now and then.. it's bouncing back that matters.
Also, just because you co-founded a startup or raised some money, you're not a hotshot. I feel that humility is highly under-rated as a virtue. Please feel free to smack me on the head if I ever get too inflated.
It also helps to laugh at yourself once in a while. Everyone makes mistakes, and startup founders have made one of the largest mistakes one can make in a life by trying to fit a lifetime's worth of work/stress within 5 years.
Don't lose your temper at a co-founder. It's one of the most unproductive and stupid things to do.
Once in a while, give a little (time or money) to charity. You don't really need that $1 and it's always handy to have tissue around.
There are 5 cent, 10 cent problems and there are half a million dollar problems. Choose carefully which problem you want to solve in your startup. Unfortunately, we have not found that million dollar problem yet, but we believe we are closing down soon.
If the cost of trying is low in terms of effort, time and money, just do it and don't think so much about it. Just write it off as a bad investment if it does not do well.
Sometimes, it's about the money and timing. See an opportunity, calculate the risk and returns, assemble a team, strike hard and fast, get out.
Sometimes, it's not about the money, but that you really genuinely have been thinking, living and breathing that domain for the last couple of years and you really feel that you have a unique solution that is Faster, Better and Cheaper. I don't think that you really need that much passion, but if all else fails, passion might be the only motivating force left. I've seen people attract great teams, just because of their enthusiasm. It's highly contagious.
There are a lot of resources out there. Probably, one of the most useful is the Startup Toolkit.
http://thestartuptoolkit.com/ It helps to ask you the questions you should have the answers to before even starting. Even now, we're still trying to fill up all the sections with both quantitative and qualitative data and we're still finding more customers. We need more doctors to sign up so that we can more accurately diagnose what makes them happy!
"I feel that humility is highly under-rated as a virtue. Please feel free to smack me on the head if I ever get too inflated."
ReplyDeleteLike!
Your venture and lessons learned looks/sound exciting!