Probably every entrepreneur/would-be entrepreneur/anyone-with-an-opinion-on-the-subject has written a blog post about this. Just like everyone has an opinion as to what should go into a business plan (and even why to write one, which is the subject of another post but the short answer is to get funding; business modelling takes care of the rest), everyone seems to be an expert as to what it takes for a startup to succeed.
Am I an expert? No, not really. I am developing expertise, yes, but what makes me competent in my own mind to comment on the subject are a couple of things:
• Experience working in a dotcom startup in Silicon Valley, two small enterprises outside of Boston, and now an organisation in the social enterprise space in Cape Town
• A framework for business planning and modelling that I learned at Babson
• Common sense in the form of strong tactical ability. Once we agree on where we’re going it’s always been very easy for me to figure out an effective (fast, cheap, and most importantly workable) way to get there. Put more succinctly, I see boulders coming and course-correct around them without even thinking about it
• The mind of a strategist (or so I’ve been told, more than a few times)
So, what does that give me? A combination of talent and experience and, as anyone who knows me knows, if I’m anything I’m opinionated. And besides that, right or wrong, if you’re reading this I bet you’ll learn a thing or two even if it’s just to disagree with me!
With that, here’s my list on what a startup takes to succeed (in no particular order):
1. The right team. OK this one is first for a reason, it’s really the sine qua non, and does it really need too much explanation? There is a reason venture capitalists bet on the jockey and not on the horse. A good entrepreneur and the right team can fix an idea (because let’s face it, every idea is going to need some fixing once the rubber meets the road), but the wrong team can doom event the best idea. True. I’ve seen it happen.
a. But it’s a little more complicated. You need to have people in the key roles (i.e. visionary, planning doer, doing doer, salesman, etc.). The same person can wear multiple hats, but ultimately the team has to be able to DO what it sets out to do.
b. Also, aces must be in their places. Like where I work there are no fewer than three of us who are great business strategists. But one of us is a natural leader and fundraiser, one is a natural at business development, and one of us is a thinking doer. So comparative advantage is also important.
c. The team MUST have passion for the idea. No passion, no followthrough, and the team can become distracted by … oh, is that a helicopter?
d. Last but not least, the team must have the ability to execute. This is similar to having the right people in the right roles, but really speaks to ability actually do come up with good ways of achieving goals, and actually following through.
2. Good financial stewardship. Pay attention to the bottom line. It’s so easy to get caught up in sales, or product development, or operations, or fighting various sorts of fires that you forget to focus on the bottom line. And guess what? If you run out of money, you’re through (usually!!).
3. Sales focus. Yeah I know it’s weird for an ex-product person to focus on sales, but without sales, you run out of money. See point #2. If you build it, they won’t necessarily come, no matter how damn good your mousetrap is.
a. Tim Ferriss, who I had the pleasure of going to high school with (he wouldn’t have been my pick for self-made self-help guru but hey we’re all different in high school) summed this up quite nicely when he wrote that it’s far better to have customers and no product than the reverse.
4. Something people want (or preferably need), NOW. This one is so simple but often overlooked: there must be a clear and distinct customer value proposition.
a. First of all, you must be solving a real, burning customer problem (or filling a strong desire). I mean sure, you can sell bobble-head dolls for a while but every fad fades. If you are helping a customer in a real way rather than trying to force something on them, you’re going to have staying power.
b. Solving a customer need is better than solving a customer desire. Without going into the hierarchy of needs, you’re going to have more success the weaker the customer power in the equation. If they need you, it’s a hell of a lot better than if they just want you, not least because wants may change (needs might as well, but it’s harder), and you are competing with a lot of other wants (and needs).
c. The idea must not be ahead of its time. Market windows are real things, and to a certain degree if you’re a bit late to market you can catch up. Check Google: when it entered the scene there were something like 6 or 7 major search engines: Yahoo!, Ask Jeeves, Inktomi, Webcrawler, Lycos, FAST, LookSmart (I’m sure I’m missing some). But if you’re too early to market you’ll burn through your cash before you can get people to adopt what you’re selling. Make sure the customers are ready.
5. Competitive advantage. So you have identified a customer need: people need to eat. Great; I can solve that one by providing a place people can go to purchase food that they can go home and cook. But why should people buy from MY grocery chain?
a. Learn what motivates purchasing decisions (well, the ones that aren’t done solely on brand or reputation!), and how to get people to change behaviour and start buying from you. This one is key: if you can’t answer why people should buy from you, go back to that customer value proposition. Until you have that right, you are building on VERY shaky foundations.
b. Understand the competition (including the status quo). If a customer has a need and they are not buying from you, why not? What is the competition doing that you’re not, and how can you react to that? Oftentimes your biggest competition may be the status quo. How do you break people out of that mould of NOT buying, or buying a substitute product?
6. Belief. Or faith, maybe? You must believe that you can do what you have set out to do. Many of you have heard this one before but my metaphor I use for this is lifting a weight that’s near your 1 rep max. In order to do this three things must be true:
a. You must be strong enough to lift the weight
b. You must have the correct form, because with a light weight you can be sloppy as hell but you can’t do that when the weight gets heavy
c. You must believe that you can lift the weight.
I would say that something like 90% of my failed lifts fall into category c. Which is why I need to believe I can do a muscle-up before I attempt one. But anyway, if you don’t believe that you can achieve what you are setting out to do, you’re not guaranteed to fail but if the challenge is big you are certainly not setting yourself up to succeed. What you think about, you bring about. So think about success.
7. The right support network. Mentors, connections to open doors, advisors. You can’t do everything yourself and plugging the holes and gaps in your offering (as well as having people point out your own blind spots) is critical.
8. Money. Left that one for last. Yes, you need money but be very careful of what you give up to get it. Someone once offered me a blank check for $1 million in exchange for 20% equity in whatever business I might start up. The first words out of my mouth were something along the lines of “I would never take that deal.” The sooner you can break even on sales, the less equity you need to give up, obviously. Be very careful! Venture capitalists expect 7 to 9 of their investments to fail, so they need to make sure they get good margins on the ones that don’t. That makes their money very expensive. Take as little as you need at any given time!
So that’s all I can think of right now on what you need. What doesn’t hurt?
• An attractive industry (think Porter’s Five Forces, a quick back-of-the-napkin will tell you this)
• Good marketing, PR, and a sexy brand
What I have seen here in Cape Town is a lot of passion and raw talent, which is necessary but not sufficient. There’s an old adage “you don’t know what you don’t know.” This is true. High capacity people may need money and mentoring/strategic guidance. Less experienced people may need more direct skills transfer. It’s great that a lot of initiatives are trying to plug these gaps, from Silicon Cape to Umbono.
Providing money without a support structure can work (that’s the classic venture capital model), but it has a high failure rate. Providing a support structure without money isn’t going to work too well because you do need that initial cash injection (in most cases).
What has been exciting me for the last few days is how cool what we at Heart Capital do because it’s a combination the likes of which I have never seen of seed money (this is to come, but it’s part of the vision), incubation that is specifically tailored to the current level and desires of the startup social enterprise, and hands-on work. We will get in the trenches as part of incubation if that’s what the need is. Consulting hours are consulting hours and we don’t need to spend all of it in the boardroom talking strategy and marketing plans (or even customer value propositions). If our hours are better spent making introductions, or fundraising, or even planting trees in an all-hands-on-deck situation then that’s what we’ll do.
Last week was a good one. We set a couple of balls rolling, and there was a distinct change in the energy. There will be another change tomorrow; I know already.
Trying to remember what all I did last week since the last time I posted. I think Wednesday and Friday evenings I didn’t do much other than go to the CrossFit classes. On Wednesday we did a super fun workout (30 pullups, 30 dummbell squat cleans, 30 kettlebell swings, 30 wall balls, 3 burpee box jumps) but unfortunately it re-aggravated my knee. The good news is that I did get it diagnosed, and it’s tendonitis so I should be able to get it to heal up pretty quickly between these lovely NSAID patches and resting it. I am just hoping next Saturday’s workout doesn’t involve any sort of squatting! Friday we flipped the tire a bunch of times and then because we didn’t have the rope to climb Chris decided to have us reverse bear crawl up the stairs. Never mind what that means because it’s absolutely nuts. But flipping this tire so many times much improved my tire-flipping technique. It also removed a bunch of skin from the back of my fingers and caused Chris to make fun of me because I broke a nail.
Saturday was this week’s Open workout: as many rounds as possible in 15 minutes of 9 deadlifts @45kgs, 12 pushups, 15 box jumps @50cm. Now I was terribly disappointed in this one because I really wanted to get to 10 rounds and I only got to 9 even (and even that was close). I just absolutely died on the pushups because the form standards were VERY strict: you were not allowed to “snake” and push your shoulders up before your waist. I am sure I could have gotten to 10 rounds if we’d been doing “standard” pushups, but we weren’t. So I was quite disappointed that my strength gave out; I was spending nearly a minute on the floor doing pushups in the later rounds which is sad; my first few rounds I was done everything in under a minute. Oh well. I’m currently sitting at 7th in the region for this workout which also doesn’t please me very well. But, that’s life. Moving on… I guess the good news is that I got a PR on consecutive ring dips after the workout (and after some volume training on pullups). That’s actually kind of impressive; not long ago I could barely do 1 and to be able to do 5 in a row while tired after only about three weeks, well, I was happy.
Thursday night we had an event at the Hub that went off very, very well. I also had the pleasure of hearing Jeremy Loops play for the first time (I know Jeremy from Greenpop, but he’s also a loop artist). Oh my God, I mean, I had heard he was good but I was blown away. Blown. Away. I stayed up way past my bedtime to hear him (I was planning to leave at 9:30 and get to bed but I think I left at like 11:15 or so once he was done and I’d gone up to tell him exactly how awesome I thought he was). That still blows my mind. I very nearly went out to see him play the next night too but I really had to be getting sleep before Saturday’s devastating workout so I restrained myself. Apparently I was the only one.
Saturday: some retail therapy (bought a blender and soufflé dish), dinner with Deon in Gordon’s Bay and hung out for hours in his flat in Stellenbosch after. Slept poorly, woke up and went to yoga. 22 minutes of downward-facing dog into upward-facing dog would have been a lot easier if my shoulders hadn’t been shot from yesterday! Brunch with Kerry @The Twelve Apostles, then hung out in the hammocks in the fynbos garden for a couple of hours talking. Browsed the Kalk Bay bookstore and made a couple of interesting purchases; decaf and pea soup @Olympia Café, home to make dinner and write this blog post. Now: bed, because it’s past my bedtime again but I somehow get the sense I won’t have time to finish this blog post tomorrow.
I was just saying today how it really is true that things seem to be speeding up. It’s amazing how things can change in just one day, or how when you peel back layers of the onion you begin to understand why things are the way they are, and sometimes, just sometimes, exactly where they are going. Don’t be surprised now if things you thought would take weeks or months or years wind up happening much faster than you ever expected. Expect the unexpected.
And I’ll leave off today with Dina Oelofsen’s motto:
If something frustrates us, we have one of THREE choices:
1. Change it or DO something about it.
2. Leave the situation.
3. Accept it as if we have chosen it.
(P.S. Complaining about it is NOT one of the choices available)
• “Oh, you’ll climb that rope!” – Chris
• “When we do something we want to win, right?” – Peter
• “…but then I realized you’re no ordinary woman!” – Peter (I think he meant remembered)
• “Of course he is! He’s a f*cking genius!” – Misha
• “When was the last time I told you to do something that wasn’t going to hurt?” – Roland
• “If I die tomorrow I will die passionless. So should I take a chance and go for passion?” – Deon (bet you can guess what I told him)