There are a lot of articles out there about what to do and not to do when starting a company. The lists range from the avoidable mistakes (“Don’t… buy a suit”) to the impossible-to-follow “Do… think like a founder, not a manager”). But if you’re getting started today, that advice is useless because it doesn’t account for the present environment. So, here’s some wisdom from someone who just went through the process: What does an entrepreneur need to be successful today?
1) Don’t obsess over ‘lean’ – Whether you’re tempted by Eric Ries’ famous book or have been overwhelmed by VCs excited about your “lean startup” approach, you need to stop. Many serial entrepreneurs fall into this early on because it turns out that running a company isn’t the same as writing software. Software companies can undoubtedly benefit from lean concepts like continuous integration, collaborative design, and open development, but you have to switch gears at some point.
Yes, your first version should be simple (if not downright crude), but if it takes more than a few months of work, then you’re going about things the wrong way. When venture capitalists or customers start hammering your team with requests for changes, remember what Jeff Bezos said: “You know you’re onto something when all the changes are hard.” If they’re anything less than complex – if they require tweaks without breaking something else – then you’re not building a product people love. So don’t be afraid to push back and say, “No.”
As per Paul Haarman, this is a tough transition for engineers from a highly collaborative software development culture, but it’s a requirement of true entrepreneurs. You need to know when to stand your ground on that vision you have for the future. If changes absolutely must be made to meet customer needs, then understand why those changes are necessary before just saying yes.
2) Don’t think you won’t need funding – I’ve seen many talented CEOs with great ideas fail simply because they ran out of money or couldn’t convince investors they were worth betting on. Being resourceful is essential, but it’s pretty useless if you can’t convince someone to give you money in the first place.
And while some people do bootstrap their way to success (I bought out my co-founder when we ran out of money), it’s tough these days to get anywhere without VC backing. Investors are looking for scalable opportunities with low capital requirements and massive potential markets; your idea needs to be big enough that they can imagine getting ten times their investment back just by sitting on the sidelines and watching you grow.
It takes serious chops to raise money in this environment, so don’t think you’ll be able to go without funding simply because everyone else is doing it. Most people who want to get into the startup world have bright ideas, but few of them have what it takes to get other people excited about those ideas.
3) Don’t be cheap – It’s great that many successful entrepreneurs wear jeans and polo shirts to work, but don’t try to emulate them too closely because you think it will make you look more like a founder. If you’re a serial entrepreneur trying to convince experienced investors to bet on your idea, looking the part is crucial.
The VCs I know say they can smell desperation from a mile away, and nothing screams “I’ve got no one else to turn to,” like shabby clothes or an ill-fitting suit. You may not want to buy the priciest Armani suit available, but at least go with something better than Old Navy.
4) Don’t start in the wrong place – If you’re passionate about your idea and convinced it will do a great business, don’t let anyone talk you into starting small (e.g., with an affiliate program or license). You may feel like scaling back is the right way to prove yourself before raising money; you fail to realize that starting small will only reinforce investors’ concerns.
Paul Haarman says, look at how startups usually get traction: building a product people love (which takes time) and then using word of mouth to scale (which also takes time). If you launch too early, not only are you unlikely to generate any significant revenue, you’re also not going to find out whether customers like your product or if it’s scalable. You’ll waste valuable time and money on something that might never work, and investors know this; they need to see a vision of the future, not the past.