10 Important things any start up entrepreneur must know!
1. “Who needs a business plan?” Some startups think
business plans are only for investors. In reality, you should do a
business plan primarily for yourself, as it forces you to think through
all the elements. If it’s not written down, you can’t measure it, and
thus you can’t manage it. Also written plans are much more effective
communication to your employees, lawyers, accountants, and other key
players in your rollout.
2. “Once we build it, customers will come.” The hot term these days
is “viral marketing”, meaning we won’t do any marketing, but our product
is so great that everyone will know about us anyway by word of mouth
and through Internet social networks. In most cases, viral marketing
only begins to work after you prime the pump with several million in
real marketing over a couple of years.
3. “We really have no competitors.” VCs and angel investors hear this
one all the time. The investor view is that if you can’t find any
competitors, either you are not being honest, or you haven’t looked, or
there isn’t any market for your product. Your funding request will
likely go into the circular file.
4. “Our product can do more than anyone.” Just because you included all
the features of Facebook, Twitter, Pinterest, and LinkedIn in your new
social networking product, doesn’t mean everyone will love it. In fact,
quite the opposite usually happens, due to complexity and work to
switch. Investors like laser focus on a market-need causing real pain.
5. “Big company is too big/slow to be a threat.” Usually
the reason the big companies are no threat is that the market is too
small. Competing with Large Company and other mid sized companies is a
very difficult task. Entrepreneurs who utter this line are kidding
themselves. They may think it’s bravado, but investors think it’s
stupidity.
6. “We have the first-mover advantage.” That’s
probably the soft way of saying, we don’t have a patent or any “secret
sauce” for a competitive advantage. Unfortunately, a startup with no
brand name and no intellectual property is a sitting duck for the big
slow company, as soon as they see you gaining a bit of traction.
Sleeping giants do wake up.
7. “We need to minimize our risk.” This is usually seen as the
difference between involved and committed. Investors expect the founder
and other principals to have “skin in the game,” over and above “sweat
equity.” If you and your friends are trying to play Donald Trump, don’t
expect other mere mortals to carry the risk load for you.
8. “We’re funded, now we can relax.” Quite the opposite is
really true. Now the real work starts to build a sustainable business.
Now you have to manage to budgets and timelines, and avoid the
temptation to splurge a bit on office space or too many new employees.
9. “It’s the market, stupid.” It’s great to have a passion
about a favorite new toy you invented, but just because you love it
doesn’t mean the whole world will love it. Another variation on this
theme is the person who creates a “solution” from technology, and then
makes up a “problem” that it will solve. There is no substitute for
understanding the market, and sizing the opportunity, before you climb
out on a limb.
10. “Me, myself, and I.” a promising
startup can wither and die for lack of funds because the founder
may refused to consider stepping aside as CEO in favor of a more experienced
candidate, as a condition of a $50M in Round C of VC investment. Best is to “kick yourself up to Chairman”, but some want it all, and
let ego take precedence over good business sense.
You probably think these are so obvious that they are clichés. I wish
that were true, but I still see them happening every day. The most
successful startup founders are never too busy to listen to the market,
listen to their advisors, stifle their ego, and enjoy the ride. It’s a
lot more fun than the alternative.
