Off to the Races
Earlier this year, I wrote a series – The Journey Parts 1-7 – focused on steps successful founders take to evolve from the idea stage to defining their business models, the planning process, and communications.
During the past year, the population of people trying to go into business for themselves has been growing exponentially. In the US and the EU, the “Great Resignation” or “Big Quit” trends have multiplied, driven by the Pandemic and the related growth of technologies allowing a wide range of traditional business functions to be carried out remotely. In March of 2021, a Microsoft survey found that over 40% of the global workforce is considering leaving their employer this year. Middle and C-Level management are starting new businesses or joining early-stage startups. Others are using new technologies and fulfillment options and turning their “side gigs” into full-time ventures.
It’s hard to go a day without seeing articles about new tech founders raising millions of dollars on a new idea or concept, causing many to decide, “it’s time for me to get in on the game, call the shots, and make a ton of money.” The number of startups during the first year of the Pandemic increased 23% in the US alone.
The term “startup” isn’t a synonym for “any new business.” Startups are companies based on innovation that intend to disrupt entire industries developing new products and services in the process. The big tech companies started life as startups. Most startups are funded by VCs with the goal of eventually going public.
Startups create products and services that don’t yet exist, requiring new business models to succeed. Startups must scale fast or get left behind. The question of maintaining control versus building wealth isn’t relevant in the startup world. Control isn’t an option. Plowing new ground requires diverse expertise and investors willing to take on a high degree of risk in exchange for a significant interest in the company.
Regular companies build and improve on existing products and services requiring minimal adjustments to existing business models. These companies have the option to remain private and under management’s control or go public in the future to fund significant growth or provide liquidity for existing shareholders.
Both face the same challenges but operate in different environments, objectives, and ways to capture them. Understanding these differences is critical.
I work with seed-funded founders preparing to execute their plans and future founders wanting to turn their “big new idea” into a business. Both groups face the same challenges to launch, survive, and grow but the gap between them is littered with ideas that never made it to the starting line. In some cases, their “big new idea” might have proven feasible, but a lack of understanding, or worse yet, false confidence on how to move forward, crushed them.
My intent with this series is to help future founders understand the environment in which they compete and their options. I’ll address critical decisions to make early in the process to increase your odds and how avoiding them might lead to failure down the road.
It doesn’t matter if you’re starting a lifestyle business (a personal income stream), a small to medium-sized enterprise (SME), a Nonprofit, or a Tech Startup; each compete in the same four races:
- Control versus building wealth?
- Solo founder or cofounding team?
- Solution looking for a problem versus a solution to a known problem or need?
- Are you focused on the right things?
- How to recognize and combat Confirmation Bias?
- Is there a market for your product or service?
- Is it big enough?
- Who needs what you’re selling?
- How is the market changing?
- Why now?
Running out of money
- Are you spending limited resources on the right things?
- How much do you need?
- What are your realistic funding options?
- Are there alternative options available?
- How will you decide which to pursue?
Competitors (known and unknown)
- How is the problem currently solved?
- Who are your competitors?
- What will you do to catch up?
- Are you vulnerable to expected changes, or will they accelerate your business?
Developing a clear view of why you’re starting your business, an honest assessment of your starting point, and a clear picture of where you want to end up is your first step. In doing so, you’ve defined your start and finish lines. You have a head start if you have related experience, expertise, a strong business background, and management skills, but those alone won’t guarantee success.
If you’re starting with nothing more than an idea, you’ve got more work ahead of you, but don’t let that dissuade you. Like everyone before you, you’ll have fears of things beyond your comfort zone, but you can plan to mitigate them with solid knowledge of what lies ahead. If you have a false sense of confidence or a bad case of confirmation bias, you’ll know early in the game, hopefully before you run out of money. Your challenge will be recognizing both and being willing to adjust.
Each of the races is interrelated. Expect the path between your starting line and launch will twist and turn, have lots of steep hills and a few dead ends. If you’ve studied the track ahead of time, your odds of making it to the finish line improve dramatically.
The race against burnout – what are the causes, and how to keep them from killing your program.
In the meantime, I urge you to check out the following articles on market research, developing your business model, and business planning by other members of our team:
- Is Your Concept Feasible?
- Your Business Model is the Foundation of Your Business Plan
- Why Business Plans Don’t Get Funded
Off to the Races Series
- Introduction (Part 1)
- Burnout (Part 2)
- Market Dynamics (Part 3)
- The Race against Running Out of Cash (Part 4)
- The Race against Competitors (Part 5)