TO BE OR NOT TO BE A(N) (UN)SUCCESSFUL ENTREPRENEUR

This article's title is a great challenge for me, since, as far as I know, there is no objective answer for it - sorry for the bad news, and if you stop reading it now, I understand...

Relevant entrepreneurship and VC columnists tend to address entrepreneurship, especially in the tech area, using successful and reference cases, and they do so wisely, because those tend to be motivating and show best case practitioners from which current and entrepreneurs to be can look up, follow or replicate best practices.

Truly Entrepreneurs however, as I see them, are not usually followers (quite the opposite in fact) and although best practices are to be taken in consideration, they hardly are followed or used “as is”. A true Entrepreneur is more likely to adapt them and to improve them, because he/she knows his/her case is (has to be) unique.

On the other hand, most common “worst practices” or “not to do list” are virtually universal and those should/must be taken in consideration, “as is”, by true Entrepreneurs since they post a hazardous area to be prevented. These practices are less commonly known, but are particularly important for early stage Entrepreneurs because knowing them is potentially both money and time saving (and may well represent the difference between success and failure).

Here are some (definitely not exaustive) examples of practices capable of quickly destroying a venture:

a) “The fast and the furious” recruitment technique

Some Entrepreneurs try to recruit the entire team all at once, not taking the time to have a first early stage consolidated team before growing sustainably their team. This happens because early stage Entrepreneurs’ ambition is high, and they want to get to first the fastest and most direct way possible… I see this, metaphorically speaking, as shifting 5 gear in your car before having shift 1, 2, 3… normally, in these cases, your car engine collapses (or get badly damaged). In business there are very few “highways with strait lines”. Statistically speaking, you are most likely be “driving” your business (at least in its early stage) in a “mountain road” (hopefully going up): drive it accordingly. On the other hand, if you are not sequentially shifting gears in a steady pace and stay “shifted in first or second gear” you will have lots of cars behind you in the mountain road… but beware, they won’t be followers, but competitors…

b) Money in a venture is like sugar in a cake, the more the better

I believe this is one of the most assumed paradoxes by Entrepreneurs and one of the most dangerous. I find that money is an early stage ventures is more like salt in a soup… too few and you can eat your soup but it will end up tasting not so good… too much and you can’t eat it at all… Leaving behind the allegorical approach, I deem the same happens in Business: under financing will make it (very) hard for the Entrepreneur to succeed and even to survive in the early stage of the venture, yet too much money in a venture and you will tend to set an abnormally big, complex and costly company (also see previous statement), making it difficult to be agile, flexible and adaptable, which, as you will see further, are fundamental aspects for an early stage company to flourish.

In addition, if you finance your venture through multi-rounds you will get better pre-money valuations. Nonetheless, do not forget to consider some money for unforeseen expenses in every stage of your venture (and expected financing rounds). Typically, for an early stage venture, one should set the first financial round, at least, for the first 2-3 years.

c) Being competitive and market leader is to have the best technology (or the best product)

I consider this statement only true if one are running a R&D centre and its’ main goal is to gather better scientists and more Maecenas. If you are to set or already set a corporate venture, you will find that not always the best technology gets you to market leadership. Examples of this “paradox” are abundant, but suffice to say that the market leaders are the ones that give the costumer the best mix of technology, price, placement… there are market leaders that do not have the best in all features. So my advice for any early stage, specifically in the IT area, is very simple: develop your product through a multiple-stage process incorporating your costumers’ and/or partners’ feedback in every stage - incorporating comments from industry’s outsiders (both technical and/or marketing) is also highly advisable -.

Remember: to be an entrepreneur is, therefore, also a “learning by doing and asking feedback” process!

In particular, one’s first release should have simple features that address relevant needs (first release should point out the most important differentiation from your competition), but as soon as possible present it to a restrict number of your (potential or actual) costumers and partners for feedback – if intellectual property is as issue, make sure you have legal mechanisms to prevent vital information to be exposed.

A (relatively) simple first release will ease the way you can explain your competitive advantage and enables you to fast incorporate the most pertinent and common feedback, allowing an easier market entrance (one does not have to incorporate every single remark from costumers to a baseline product, but, depending on your business model remember, you can always sell customise versions of your baseline product!).

Moreover, once you convince customers and partners of your competitive advantages, they will appreciate every new release as an improvement of the previous that suit their own needs and will no longer take much time to compare it with your competitors’ (until they overcome your main competitive advantage) – this is fundamental for getting early adopters to be “true” costumers.

d) Customer does not understand that your product/service is better than your competition’s

This statement is basically the corollary of the previous, but it is so important that it deserves an important highlight simply because this is one of the statements nearly every early stage Entrepreneur (even if it is in the first days of ones’ technological based venture) tends to use. This statement only suggests the entrepreneur is not that familiar with the customers and does not understand their needs/demands - it not obviously suggests the customers do not understand the product/service or that the product/service is not that good. It can suggest simple things for the customer like: “I have just invested in a competitor product/service and although it is worst than yours, I cannot reverse that investment!”

A good Entrepreneur is one that only has this feeling in the first days (if one is a very good Entrepreneur one will only have this feeling while he/she is doing his/her homework before setting up the venture). So a small piece of advice:

1) Know your (at least) first (even potential) costumers by heart in terms of their: needs, financial capabilities, processes of decision, eventual timings of purchasing, current suppliers; legal constraints;

2) Set your product, business model, commercial, production and support team, marketing, financial, accordingly, in short, do a Customer’s oriented Business Plan. Sometimes, you may also be ready to do a brief but insightful Business Plan for your costumers (just showing the impact of purchasing your product/service on themselves or their costumers), particularly when you are selling a new product/service.

e) Start a advertising campaign and wait for the costumer to contact you

Those who are “pseudo-entrepreneurs” tend to address market, essentially in their ventures’ early stage, by setting “a marketing campaign” specially focused in just advertising. This happens because the Entrepreneur wants to address the widest market segment possible. Dysphemismly speaking, it is like “sitting on a chair and wait”! Entrepreneurship is to be dynamic and to address the market the more active, self-motivated and energetic approach possible. For that you must have done a proper preparation (particularly knowing your costumer and yourself – see previous statement) and be efficient on implementation.

f) I have the perfect business plan done by one of the most prestigious consulting offices and I will stick to it!

Doing your preparation wisely and carefully is in fact half-way for success. However, no matter how well prepared you are, since running a venture is one of the most dynamic activities you may have, one has to be prepared to be surprised. So, when preparing one’s Business Plan, have conscience that it is an imperfect, dynamic, open to discussion, permanent draft strategic document – nothing more. It most be set after you have understood your costumer and your marketplace (as well as yourself). When I state YOU, I mean the Entrepreneur, not a consultant (I feel free to say that because I used to be one!). One should understand that a consultant is someone you should hire for you to consult, not to do your job (the consultant will hardly be managing your venture afterwards). A consultant, when you are to draft your Business Plan, has the equivalent role of a good math teacher: teaches you to do the basic and understand principles and logic… the rest is up to you.

g) Because I can do red I will also do blue (eventually a customer will want blue)

Apart from the “Customer does not understand my product”, the statement “I can do red and therefore I can do blue” is one of the must frequent misconceptions of technological Entrepreneurs, specifically in the early stage of one’s venture. This happens mostly because Entrepreneurs have not done their preparation properly or the market has shift from one setting to another. In the first case, the Entrepreneur is in a “trial and error” approach, doomed to be unsuccessful. In the second case, one should do a revision to one’s Business Plan before shifting or broadening their market approach – because of the most relevant risk of losing focus.

h) Our venture is the best to do all we need

To be market oriented, agile and adaptive is of outmost importance for a Entrepreneur– and even more important in Entrepreneurship, therefore outsourcing tasks (with the sufficient internal control or strict contractual framework) for the non-critical aspects of one’s business is not only a common management’s rule but can be the difference between success and failure in a early venture, because it normally can, at least:

1) speed up efficient production in terms of costs, timing, quality and scale and, consequently, cost, highly influencing one’s time-to-market;

2) free one’s team, time and financial resources, for the critical aspects of the venture;

3) allow cross selling with your outsourced suppliers.

i) There are things that can be done but one cannot do it

When doing a business plan, one tends to focus, as stated, in market, customer and competition analysis, product definition, outsourcing approach and so on. Nonetheless, one cannot forget that doing so one must also take in consideration the legal and habits framework not only for your own product and company but also for your market and costumers. There are excellent economic opportunities to address in all markets that cannot be taken in consideration in business terms because there are (particularly) legal constraints.

There are many other not-to-do tasks when being an Entrepreneur that could be stated. I highlighted the most relevant, in my perspective, that lay in the thin line between being or not a successful Entrepreneur.

All successful people have been, any time of their lives, a true entrepreneur. I typically work on a daily basis with Entrepreneurs and is very clear to me that to be an Entrepreneur is a dynamic, adaptive, risky but potentially high rewarding (both financially as well as self-fulfilling) first of all, way of life (as it is to be a VC working close to Entrepreneurs)!

Be an Entrepreneur, look up for your successful predecessors but try to avoid their route mistakes … and do not forget: only you can define your venture’s route!