What I’ve learned from failed not so successful startups:
Focus on the customer first
I originally thought that this simply meant getting a couple low hanging fruit to say yes to an idea. What it really means is that you need to figure out a way to build buzz around what you are doing, before you do anything. Telling people that you have 10,000 people that want what you are cooking is way more sexy then showing them what you spent a year building that 3 people are using. Build buzz and don’t worry about “someone stealing your idea” because if an idea is all you have as an advantage, your dead anyway.
Cash is like oxygen, but too much cash too early is like poison
By not having enough cash to get customers and build a great product, all you are doing is starving the opportunity. Then before you know it someone else is there and has built your great idea. After all, ideas are a dime a dozen. Execution is what matters, and it is difficult to execute with limits in engineering talent, by outsourcing or by holding a day job.
That is why you SHOULD raise capital
Bottom line: If you can’t convince someone to give you 1M, you won’t be able to convince someone to buy you down the road for even more money. Plus you are missing out on the network of those investors to take your product to the next level.
Investors invest in people first, ideas, then revenue
The most important aspect of your presentation to investors is the team member’s “relevant” experience. If this is your first rodeo and you don’t have X years experience in a vertical, spend a lot of your time finding the right mentor, partner, or advisor that does. If they do, they will have the right contacts to at least get you in front of the correct audience from day one. That is where the learning starts.
Launch something that you would use
As mentioned before, ideas are a dime a dozen. Do you actually have the connections to sell or make money from the product from day one? Do you personally know 10 potential customers that you could call on today? 50? 500? If not, get someone on you team that does. He/she will be the most valuable person on your team.
Launch something in a market that you know deeply
I’ve spent time with a lot of successful entrepreneurs that have built highly profitable businesses with under 10 employees. My questions are always the same – “how did you get your start?” and “Were you profitable from day one?” One commonality is that they always launched a business in an vertical they both understood deeply and had lots of contacts in. Checkmate.
Know the customer
I’m not taking market statistics. I’m talking about shadowing your customer, knowing what they buy, how they pay, and the process of doing so. Case in point, we spent 6 months and built a solution for universities because they said they were interested but failed to realize that they were so buearacratic that it took months to get even a $50 payment approved. But when we made the product free and owned the ad rights, we had more success. Much less approval and actually a better margin for us.
Investors like this format for presentations
It may be different in the valley but in the VC’s we’ve spoken to have told us that they are sick of waiting until slide 6 to learn what problem we solve. Tell them on slide #1. Slide 2 they want to know about the team and if they even have the ability, background, and loins to solve the problem. If not, the investor can go back to answering emails or playing Angry Birds on his/her smartphone.
Business names should be short, memorable and unique
Memorable is the most important. Coincidentally relevant names are least important, though nice to have if you can satisfy the above criteria first. I once had a newspaper article interview me and post a to link back to someone else’s website – totally my fault. The business name wasn’t unique enough.
Even failed startups can have SOME success
Eric Ries suggests proving both your value and growth hypothesis in your startup as quickly as possible. His example: Facebook, for instance proved there growth by the number of people that were signing up and value since people were using it an average of 8x per day. We proved our value but never could get a good growth model going before running out of oxygen.
You don’t have to be in a great market, you just need to build a great product
The media gives the impression that you need to follow the latest shiny object in tech. For instance in the late 90′s it was the web, in the early 2000′s it was social networks, now it is mobile apps. What they don’t tell you is that only a small percentage of mobile apps ever gross over $30,000. Also, if you read between the lines, you will notice that great, simple products that get released when there is already ample competition in the space, often do really well, like Mint.com or Basecamp. Furthermore, there are plenty of unsexy products that practically print money. A few examples of these that I know of are a logistics freight auditing company, a middle-man to transfer cars between car dealerships, and a marketing an promotion company that has less than 10 employees, but has clients like Disney and the NBA. The commonality is that they all of their solutions actually solve a problem.
It is all about who you know, and more importantly, who knows you
My suggestion is to meet and get to know as many people as possible. Ask them about themselves, what they do, their families and be honestly interested. Most importantly don’t expect anything in return. You’d be supposed where people end up, how they remember you and what gates a bit of conversation might open you in the future.
Finally, get an investor/critic’s feedback ASAP
We didn’t start talking to investors until 10 months after we started. Once we did, they lit us up. But their points were valid and I wish we would have ad that feedback in month 2 or 3. It would have saved us time and pride. Disclosure: this cannot be a relative or any cheerleader that will make you feel warm and fuzzy. It must be someone who as been there and also has your best interest at heart.
So I am sure I am forgetting other lessons but these are the most prominent currently. More later…
