This is not a statement of doom and darkness. It’s just math.
Everyone these days has a startup idea. All of them have one dream. My startup is the next killer app and I will be really really rich, soon. But before you jump on the bandwagon, do read.
Good data is hard to come by. But estimates are that only 1 in 10 startups gets an angel/ seed round of funding. Out of these only 1 in 10 make through Series A,B,C funding. Do the math. Just 1 in 100 startups makes it to the series rounds, leaving the rest 99 in the elephant graveyard. Only a tiny fraction of the funded 1% ever hit the Unicorn stage and rarer still are the ones that get a successful IPO. The data could vary depending on who you believe. Either way, only a tiny fraction ever get to a stage of funding where the startup can build a serious business. The game only works if few survive. Only then can they get the dizzying valuation. It is in the interest of the investors to pick just a few winners and leave the rest to their fate. These winners and their investors create such a hype that everyone is forced to say ‘hey I am missing out, I want in’. Everyone wants to be in that Casino.
There is also a lot of good that is coming about with this gold rush. A lot more people are looking at a lot more problems in the world to solve. A lot more minds are getting connected. A lot of fundamental business paradigms are being questioned. A lot more enterprise.
But what of the Club 99 and all those associated — founders, workers, early investors, families, vendors etc. What are they supposed to do? They have sacrificed time, money, opportunity and relationships to chase a dream which turned into a nightmare. Their livelihood cannot be just brushed away in words like ‘boom and bust cycle’, ‘down rounds’, ‘winner takes all’ and any other term used frequently within the start up circles.
The purpose of this post is not to discourage. Quite the opposite. There can be life after death for every business. But only if you prepare for it from birth. A friend told me recently that it is unfortunate the term ‘startup’ has come to mean a business which gets VC funding, usually technology enabled. But that’s only one kind of business opportunity. There are so much more ways of approaching a new business idea. I agree with him a 100%. Here I offer a few pointers which helped me to build Awesummly and I strongly believe these can be helpful for every startup.
1. Get a hold of your dream. All founders espouse their ‘dream’. But most of what I have heard translated in simple English means ‘I too want to get rich, that other guy got rich’. This is not a valid dream, vision, mission whatever you call it. The dream of your business has to be truly linked to the problem you want to solve.
2. What problem are you going to solve? Has that been thought about enough? Have you lived that problem? How many people you personally know who face this problem frequently? Is it a real problem?
3. How good is your solution? Is it really doing something no one has done before? What are you innovating? Improvements will make you fail. It has to be radical. Fresh. Powerful. As I had said in a previous post, you need 300 ideas for every winning idea. Next, think what problem will your solution create and for who? Every good solution must create a new problem.
4. Know your customer. You should build things which are needed. You must learn what customers really want, not what they say they want or what you think they should want.
Moral: If you are not the Customer, Don’t build it.
5. Understand the market. Know everything there is to know about your market. The dynamics, the technology, the competition. Competitors are not always evident. Define your competition basis the problem not basis who else has a similar business model. Uber sees your personal car as its competitor.
6. Always make 2 business plans. Plan A for Club 1 where you will get funded at every stage. Plan B for Club 99. A plan assuming you won’t get funded. There could be multiple versions of B. This is your survival kit. It is possible for a lot of business ideas to survive without funding if planned appropriately. Always work for Plan A but never lose sight of Plan B.
7. Do not follow templates and guidelines. There is a lot of advise and templates on how to prepare the pitch deck, how to approach a VC, how to structure your startup, templates of websites and apps. Anything you need to create, there is a template for that. Problem is everybody has the same template. So how will your business stand out? How will you showcase your innovation? The most successful startups did not start with any templates. Templates will box your thinking. Guidelines will bind you down. Think of your approach to business and funding as part of the problem you have to solve.
8. Delay investor funding. Never be in a hurry to take money from investors. Investors bring capital but take away stake and freedom. They also bring templates. Metrics. Pressure. Advisors. Their own dreams.
9. Do not let investors run your business. I know a lot of my investor friends will not like this statement but the fact is if they were as good at running your business, they would have done it themselves. Take their inputs but own your business. Run it your way. A good investor will respect it.
10. Excel. Only do what you are really good at. Don’t do things you can’t. Outsource operations. Stranger source new ideas.
11. Forget Pivot. This is another term which is fast becoming the bane of startups. ‘Course correction’ is fine. But talk of Pivot is distracting. It takes conviction away from the original idea. No problems can be solved overnight. But rather than work hard at that solution, even taking months or years, a lot of startups keep changing the model ‘hoping’ it will work. Unfortunately, hope is not a business term. Each time you pivot you loose sight of your original mission and problem.
12. Watch what you spend. Make every penny count. Learn about the cost of everything. Question every cost. Why do we need an office? Why so many people? Why free coffee? Everything. Invest only in things that will directly build the business. If you are known as an unreasonable miser in your company, you are doing something right.
13. Finally, fear. The best human instincts come out of fear. We are programmed to survive when faced with dire situations. That’s when super human feats happen. Work like every day is the last day of your business. You will be surprised with the results.
I am sorry for the long post. But I do believe if you follow some of the above, you will discover there are 99 ways to live.
Do comment or write in. Let’s connect.