As summarized by my good friend Doug Petkanics:
There’s a lot of luck involved in running an early stage startup, but there are certain things that you can do to maximize your chance of success. Three things you should be doing include embracing the local startup community, focusing on becoming a visible domain expert in your startup’s field, and iterating quickly on an early minimum viable product.
It may be your connections in the tech community. It may be that you’re in a ridiculously hot market. Or maybe you worked at Facebook on Platform before release in 2007. I don’t know and you’re mileage may vary.
What I do know is largely in your control. Others are out of your control, most notably economic conditions - I know too well, as we tried to raise our first round of funding in the midst of the financial market collapsing early 2008. Entrepreneurs develop a plan to succeed based on vision and passion for what they’re working on while adapting to speed bumps along the way. However, vision and passion can only take you so far. Enter “accelerators” to the early stage game, specifically (1) previous success or “track record” as Jason calls it and (2) customer adoption.
From a funding perspective, an angel or institutional investor looks at an early stage business based on various dimensions across product sustainability, market size and exit potential. If three of these dimensions are pointing in the positive, chances of funding are exponential. But what could turn these dimensions into an “accelerator?
Investors look to minimize as much risk as possible in an industry that’s one of the riskiest in consumer internet - especially early stage - given the tremendous potential for failure. Generally, investors will analyze the founding team’s previous track record or customer adoption rates within the space the company is currently operating in - if there’s a match, the entrepreneur is in very good shape. However, by definition, first time entrepreneurs face an uphill battle trying to compete in fundraising, product development, press, customer acquisition, etc. against more seasoned veterans and their respective companies. Whatever the channel of competition, starting a business is hard and running one to be successful is even harder.
But the facts shouldn’t deter you. Absolutely not. They should motivate and even spark a sense of curiosity in how the veterans did it. I believe there’s a process that new entrepreneurs can adopt and change the playing field by beating luck and altering the market conditions in their favor to form their own “accelerator.”
Step # 1: Infect Your Community
I’ve heard that successful entrepreneurs surround themselves with the smartest people they know or have networked with, in various fields. This is under the assumption that the entrepreneur is constantly absorbing ideas and information from their friend network and not doling it back out.
Sometimes, when I hear these stories, I imagine the entrepreneur standing in the middle of this big group of folks as a real-life sponge, soaking up all their discussions and getting so big with conversational water, the entrepreneur is stuck. He can’t move because he’s saturated with everyone’s own ideas, suggestions, feedback and critiques.
Your community, little do you know, exists in your own backyard - but you need to find it. From my experience, as I moved to New York City from Washington, DC, I didn’t know of a technology scene or culture in Manhattan. At the time, services like Plancast wasn’t around or niche newsletters just for events like Startup Digest or Gary’s Guide touched my GMail inbox.
DO: Subscribe to these services and infect your community by attending events and meetups on a weekly basis. Share what you’re working on or thinking about building, as your point of view can help the person across you help you in ways you may not see. Consider the network that you build by attendance in relation to what the signal (think: can this person I’m talking to help me push my idea forward?) to the noise (ask: why am I listening to someone sell me an enterprise-grade scaling solution when I’m hosting my MVP on GoDaddy?).
DON’T: Assume. I’ve learned that running off assumptions are the death of (1) sustaining business relationships (2) listening effectively and (3) moving fast. Why? Making assumptions about someone you meet for the first time at an event usually blocks you out from truly listening (it’s a serious art) to what he/she has to say, rather than hearing what they said.
Step # 2: Prioritize Your Domain and Make It Very Visible
Now that you’ve come out from behind your 24” monitor, smelled fresh air amongst technology peers and downed a burger (hat tip Shake Shack) all the same time, don’t let your newfound community infection die off once the meetup is over. Sustain it over your business medium: online.
Say you’re building a new kind of Q/A site just for automobile enthusiasts, and since you’re a first time entrepreneur, you have a lot of ideas, but no relevant operational experience. That’s common, but what else do you have to show behind what you’re building? Your domain expertise. The public doesn’t know you spent the last four years of college immersed in car forums, interacting with users, posting, asking, answering, uploading, etc. and basically everything under the hood. You’ve followed the trends of auto activity online, how users interact with others in a closed setting, determined why they share their thoughts on fixing a carburetor. It’s all in your head and you’re one of the smartest in the field - but no one knows (except your mother and college friends, oh, and some of the new friends you met at the meetups you just attended).
DO: Make it public and publish your thoughts for the world to see. Choose whatever medium that’s fitting to you - email, blog, Twitter or whatever - but make it known that you’re the guy who gets how auto users interact with one another. You’re “that guy” who leaves smart comments on relevant blogs and “that guy” who always shows up in retweets from the folks you admire in your space.
DON’T: Think you know it all. Not yet; there’s still so much to learn as you move along in your journey. Although you’re ready to share with the world what you know, don’t think that you have all the answers and means to avoid the speed bumps, as I mentioned earlier.
Step #3: Build Baby, Build
I was going to list “Repeat Baby, Repeat” to the first two steps as step # 3 but quickly realized you’d become an industry commentator and not an entrepreneur. You’re one because you wanted to change something and more importantly, build. And that’s what you’ll do and you’ll do it smartly by testing, iterating and constantly developing upon your vision.
Your goal is to not raise venture capital at this stage but to get the all important first customer. Go after and find them. You know where they are, participating on all those automobile forums you stalked for over four years.
DO: Try to get to the point where your product is the bare minimum to get the first customer, have him use the service and ideally, have him tell his friends to use the service you built. Optimize for this cycle.
DON’T: Add fluff. I’m referring to “fluff” as shiny bells and whistles (which you think would make a difference in getting customers, traffic or investors). I’ve seen friends obsess over minutia that have no immediate effect on getting users. Just don’t do it.
(Note: Listing these steps by number assume that there’s some sense of order, where step #3 occurs only after steps #1 and #2 happen. This isn’t the case, rather of all steps, #3 should be the one to start with but with #1 and #2 you’re more likely to build a better product due to a better feedback loop and idea distillery).
Like the early stage investor, beating luck (similar to picking the winning companies) is about effort and implementing a process that moves what you’re working on forward. In the first time entrepreneur’s case, simple steps help distill what and how you need to do.
Where it takes you is just another chapter in your life.
- Part of the Founder 101 series. Read more.