17,99 €
Mehr erfahren.
- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Start strong with essential early-stage guidance from the VC perspective Startup Opportunities is the go-to guide for anyone with a great business idea. Whether it's your first business or your fifth, realistic assessment from the outset can save you a lot of time and money; why pour your heart and soul into a venture that is doomed to fail? Instead, position yourself to win from the very beginning. In this book, accomplished venture capitalists share their insight on startups and entrepreneurs: who will fail, who will succeed and why, and what you should do to give your business the very best shot at becoming a global success story. You'll learn how to evaluate your business with a critical eye, and how early customer development can be key in turning a good idea into a great opportunity. If you're serious about building a business that lasts, this book provides invaluable guidance that you really cannot miss. More than five million people will launch a business this year, and many of them will be great ideas--yet few will be around in five years, and even fewer in ten years. A great idea is not enough to build a successful business. You need to fortify your idea with the proper foundation, and a scaffolding of good planning and early action. This book shows you how. * Assess your business's viability using the 10x Rule * Learn when you can quit your day job--or not * Take the key steps to making your business succeed * Discover the opportunities worth selling everything for This expert author team has witnessed more than 30,000 pitches over two decades, and have participated in over 500 startup launches. Startup Opportunities gives you the benefit of their experience to help you start strong and stay strong.
Sie lesen das E-Book in den Legimi-Apps auf:
Seitenzahl: 303
Veröffentlichungsjahr: 2017
Ähnliche
Startup Opportunities
KNOW WHEN TO QUIT YOUR DAY JOB
Second Edition
Sean Wise and Brad Feld
Cover images: Memo with paper clip © t_kimura/Getty Images;
background © Nicolas Balcazar/EyeEm/Getty Images
Cover design: Wiley
Copyright © 2017 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
The first edition of Startup Opportunities was published by FG Press in 2015.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data:
Names: Feld, Brad, author. | Wise, Sean, 1970- author.
Title: Startup opportunities: know when to quit your day job/Brad Feld and Sean Wise.
Description: Hoboken, New Jersey: John Wiley & Sons, 2017. | Includes index.
Identifiers: LCCN 2017011359 (print) | LCCN 2017009358 (ebook) | ISBN 978-1-119-37818-1 (cloth: alk. paper) | ISBN 978-1-119-37817-4 (ePDF) | ISBN 9781-1-19-37819-8 (ePub)
Subjects: LCSH: New business enterprises. | Entrepreneurship.
Classification: LCC HD62.5.F445 2017 (ebook) | LCC HD62.5 (print) | DDC 658.1/1—dc23
LC record available at https://lccn.loc.gov/2017011359
To Amy and Marisa,our wives, who are by far the best opportunities we have ever invested in
Contents
Foreword
Preface
Trust Me, Your Idea Is Worthless
Note
Chapter 1 What Is a Startup?
How to Use This Book
Who This Book Is For
Notes
Chapter 2 The Democratization of Startups
The Cost to Launch Is Approaching Zero
The World Is Flat
The Path Is Known
Access to Capital
Chapter 3 Opportunities
The Four Criteria for an Opportunity
What Is Opportunity Evaluation?
What Is the Cost of Poor Opportunity Evaluation?
Execution Trumps Opportunity
Risk, Uncertainty, and Ambiguity
The Issue of Bias
Notes
Chapter 4 Approaches to Opportunity Evaluation
Where Does Opportunity Evaluation Fit into the Overall Startup Process?
Overview of Business Model Generation
Overview of Customer Development and Lean Startup
Overview of the Disciplined Entrepreneur
A Modern Version of the Scientific Method
Notes
Chapter 5 People
Team
Working Full Time
Been There, Done That
Passion
Coachability
Ability to Attract Talent
Business Acumen
Domain Knowledge
Operational Experience
Mentors
Board of Directors/Advisors
Customers
Social Capital
Notes
Chapter 6 Pain
Compelling Unmet Need
Size
Durability and Timeliness
Notes
Chapter 7 Product
The 10× Rule
Rate of Adoption
Rogers’ Diffusion of Innovations Theory
Intellectual Property
Key Asset Access
Proof of Concept—Selling Your Product in Advance of Making It
Gross Margins
Scalability
Notes
Chapter 8 Market
Market Stage
Product/Market Fit
Disruptive Innovation
Industry CAGR
Distribution Strength
Customer Acquisition Costs
Viral Marketing
Competition
The Goliath Paradox
Barriers to Entry
Government Regulations
Partnership Status
Knowing Why You Need to Raise Money
Notes
Chapter 9 Plan
Time to Launch
Plan to Scale
Reasonable Not Right
Get Out of the Building
Plan B
Notes
Chapter 10 Pitch
Short Form (Under 10 Minutes)
Long Form (30 Minutes)
Business Plan—or Not
Executive Summary
Q&A
Notes
Chapter 11 Raising Money
Building a Relationship with a Potential Investor
Who Makes the Ask?
Use of Proceeds
Raise the Least Amount of Money to Get to the Next Level
Ask for Money from the Right Kind of Investor
Raise Money When It’s Available
You Aren’t an Exception
Why Anything Other Than a Yes Is a No
Be Realistic about Your Valuation
Even Angels Have Investment Committees
Notes
Chapter 12 Pitfalls
Showstoppers and Red Herrings
Excessive Valuation
Taboo Businesses
No Skin in the Game
The No Asshole Rule
The Key Person Dependency
Drinking Your Own Kool-Aid
Notes
Chapter 13 Don’t Quit Your Day Job If You Aren’t . . .
Passionate about the Space
Able to Execute the Solution
Certain That the Problem Is a Need (as Opposed to a Want)
Certain That the Problem Is Shared by a Large (and Growing) Market
Able to Offer a Solution That Is 10× Better Than Anything Else in the Market
Ready to “Burn the Ships”
Able to Access Potential Customers
Able to Spend Six Months without Personal Income
Able to Garner Enough People, Users, and Money to Create a Minimum Viable Product
Prepared to Get into the Weeds and Do the Grunt Work
Glossary
Acknowledgments
About the Authors
Index
Excerpt from Brad Feld's Venture Deals, Third Edition
Crowdfunding
Product Crowdfunding
Equity Crowdfunding
How Equity Crowdfunding Differs
EULA
List of Illustrations
Chapter 2
Figure 2.1
Falling Cost of Tech Entrepreneurs Launching Product
Figure 2.2
Total Amount Pledged per Year
Chapter 4
Figure 4.1
Duke Center Entrepreneurial Process Model
Figure 4.2
Barringer and Gresock (2008) Stage-Gate Model
Figure 4.3
Scalable Startup
Figure 4.4
Osterwalder (2010) Business Model Canvas
Chapter 5
Figure 5.1
Wise’s Talent Triangle
Chapter 7
Figure 7.1
Rate of Adoption of Technology in the United States
Chapter 8
Figure 8.1
Rogers’ (1976) Diffusion of Innovations Theory
Figure 8.2
Technology Adoption Lifecycle
Figure 8.3
Business Model Validation
Figure 8.4
System Evolution (“S Curve”)
Figure 8.5
The Disruptive Innovation Model
Chapter 9
Figure 9.1
Validation Board
Chapter 11
Figure 11.1
The Entrepreneurial Process.
Figure 11.2
Cameron’s (1998) Spectrum of Financing
Figure 11.3
Lead to Win Lifecycle Stage Model
Figure 11.4
Investor Screening Funnel
Guide
Cover
Table of Contents
Preface
Pages
xiii
xiv
xv
xvi
xvii
xviii
xix
1
2
3
4
5
6
7
8
9
10
11
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
29
30
31
32
33
34
35
36
37
38
39
40
41
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
63
64
65
66
67
68
69
70
71
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
163
164
165
166
167
168
169
170
171
173
175
176
177
178
179
180
Foreword
“Dear Chris. I have an idea that will revolutionize a $34 billion industry . . .”
Do you know what that is? An email I will never open. No matter how elegant the prose that follows, I see a snippet like that in Gmail and immediately hit Archive.
Why? As you’ve heard me say for years, “Ideas are cheap. Execution is everything.”
At some point, each of us has had that moment where we say, “Wouldn’t it be cool if . . . ?” Every single human being is capable of churning those out. In fact, I am certain some of you once thought, “Wouldn’t it be cool if I could push a button and have a car and driver show up?” “Wouldn’t it be cool if people could rent out their houses for just a couple days at a time?” “Wouldn’t it be cool if there were an API for payments?” “Wouldn’t it be cool if you could make phone calls and text into your app by using just a little bit of HTML?”
You came up with those ideas, so why aren’t you a billionaire founder on the cover of a magazine? You even bought the endearingly vowel-free domain name, so why aren’t you going public?
Because all the value, all the magic, all the accomplishment, and everything else that matters in entrepreneurship comes in the grueling months and years following the “Wouldn’t it be cool if . . . ?” question.
Since I started making seed investments in 2007, I have been obsessively focused on founders. I spend tons of time with them and go deep in the areas I know well. I never worked on Wall Street or at P&G, and I suck at Excel. So, if we team up, I’m not your supply chain manager or ads optimizer, nor will you catch me estimating Q3 sales five years out.
If we work together, I am there to help you make your product easy and real.
Back in the day, it was expensive to start building a company. Software was proprietary, founders had to buy pricey servers, and they even had to run their own equipment racks in a speedy data center. All of this meant entrepreneurs needed to raise lots of money before they could build anything.
The result? Ideas were splayed across 60-page business plans written by investment banking trainees. Aspiring CEOs were forced to run the investor gauntlet and have every assumption questioned. Hand-wavey bullshit artists with dog-eared copies of Getting to Yes and Starting with No on their genuine faux leather coffee tables drove the painstakingly Socratic process.
Today, with open source, AWS, GitHub, and coffee shops with free Wi-Fi, there are few barriers to taking an impulse and slapping some code on it. Just $99 will get you a solid logo and smooth-looking homepage that makes it look like you know what you’re doing. No more professional networking connections needed, no fancy B-school degrees, and no slick-talking pitch doctors. These days, builders gonna build.
Raise a glass to the democratization of it all! And best of luck to all the now unnecessary investment bankers with incredible PowerPoint and personal grooming skills who have since moved back to New York City to apply their talents to some predatory lending scheme or mass layoff.
But the downside? Too many of you who are founding stuff are skipping the part where smart people beat the shit out of your idea over and over again before anything gets built.
When I first got into this investing business full-time, I was holed up at Brickhouse on Brannon in San Francisco hearing back-to-back pitches. Small teams who could show me live code were impressive. I loved being able to play with a site or an app rather than merely considering a hypothetical.
Yet, almost everything they showed me was irretrievably misguided from the get-go. I met hundreds of entrepreneurs who didn’t even know their own competitive landscape, let alone have the ability to describe to me in plain English why they would win the space. It was devastatingly clear: They hadn’t done the intellectual work that would be the foundation for everything that came next.
In 2008, I’d had enough of these frustrating conversations, so my wife and I moved to Truckee, a small mountain town near Lake Tahoe. Our thesis was that instead of running from coffee to coffee, we’d identify the most intriguing minds in startups and invite them up to our house for weekends. We would go deep with the founders whose thinking challenged ours. Whether we were skiing, hiking, cooking, playing music, or snowshoeing, we were also spending that time batting around visions and predictions and controversial points of view. We would sit around for hours in our hot tub, which soon became known as the “jam tub.” For days at a time, we just jammed on ideas, pushing one another’s reasoning, testing assumptions, and forging moments of clarity and inspiration.
We soon realized that this worked elsewhere as well. Whether we were in Austin, San Francisco, Montana, New York, Paris, Oxford, Boulder, or Vancouver, making time for meaningful group discussion was not only the most fulfilling way to spend time, but it was leading to more genuine friendships and, ultimately, much better ideas across the board.
So who was in those jam sessions? Founders from Twitter, Instagram, Twilio, Uber, Lookout, Stripe—you get the picture. Sure they are legendary companies today, but consider what those early jams were like. For example, as obvious as Uber may seem today, extensive creativity, original thinking, and robust debate were necessary to hone in on the real problems in the industry and focus a solution to build.
These great entrepreneurs didn’t just come up with a great idea. They started with a notion and bounced it around a lot before ever starting up the business. Who they bounced it around with was vital. Early co-founders, advisors, friends, and mentors made a huge difference. What they did with the idea mattered. If they just sat on it, it died. But if they ran around and talked to a bunch of prospective customers or users, it got better. If they actively listened to feedback and incorporated some into their plans, it got even better.
The most successful founders are listeners, thinkers, and tinkerers. They are iterative, reflective, and rigorous. They passionately believe they are right but enjoy when their assertions or conclusions are shredded. The very best feel that yes is boring, and they thrive when wrestling with no.
So take that cute, naive idea of yours and throw it to the wolves. Let your friends slap it around. Ask your peers to tear it up. Meet with fellow entrepreneurs and invite them to bury it. Take what’s left after your mentors spit it out and head back to the whiteboard. Stay up all night jamming. Do this again and again and again, and you’ll realize why founders of billion-dollar companies may be lucky, but their success is never an accident.
I hope to see your name among theirs soon.
Chris Sacca
Montana
March 2017
Preface
Entrepreneurs dream of the magical moment in the creative process when they have a flash of clarity about how to solve a problem or make an innovative product. They often have an interesting story about this moment, and the origin stories of some successful companies have become legend. Yet, this moment of clarity often obscures the massive amount of work required to go from an idea to a real startup. From the outside looking in, a great company appeared out of nowhere. But the entrepreneur knows differently and remembers what had to happen to get from the idea to even the most embryonic startup.
As investors, we hear a simple question from entrepreneurs multiple times a day: “What do you think of my idea?” Sometimes the idea is well formed; often it is vague. Some have already been prototyped, others are just a few sentences in an email. Some have been thoroughly researched by an entrepreneur with deep domain knowledge, others are something completely new and different that the entrepreneur is exploring.
While it is easy to have an idea, it is incredibly hard to translate that idea into a successful business. The startup phase of a company requires a wide variety of activities to go from idea to successful startup. In the past few years, many books have been written about this process, including foundational ones such as The Lean Startup by Eric Ries, The Startup Owner’s Manual by Steve Blank, and Disciplined Entrepreneurship by Bill Aulet.
Nevertheless, we continue to hear some version of the same question over and over from aspiring entrepreneurs: “Is my idea any good?” Sometimes it’s phrased as “How do I know if my idea is good?” or “When I have an idea, how do I know if it’s good?” Often, this morphs into “I have the following three ideas. Which is the best one?”
Many of these entrepreneurs aren’t ready to stop what they are doing and dive all the way in to chase their new idea. Some have full-time jobs and are trying to figure out how this entrepreneurship thing works. Others are playing around with multiple ideas at the same time and trying to pick one or are stuck in the ideation phase, coming up with ideas and looking for external validation, but are unwilling to commit to working on a specific idea yet.
Ultimately, they are asking some form of the question “Will there be enough demand for this product that people will use it and pay for it?” Even after being pointed at books and approaches like the Lean Startup, they still have questions about whether their idea is any good.
It’s not a simple question to answer. Most successful companies go on a long and winding journey to find the answer. A founder used to write a comprehensive and tightly structured business plan that evaluated all aspects of the potential business. This document took hundreds of hours to write and tried to set up the theoretical case for the business without testing anything.
While business planning isn’t obsolete, the business plan is. It has been replaced by methodologies such as the Business Model Canvas, Business Model Generation, Lean Startup, Lean Launchpad, and Disciplined Entrepreneurship. Each of these methodologies uses a structured, experimental approach with quantitative feedback loops from potential users, customers, and partners to evolve an idea to a foundation upon which a startup can be built.
But that still leaves us with the questions “Is the idea any good?” and “Should I pursue this idea?”
It is possible to get to a better starting point if you spend some time in the opportunity evaluation phase. Before you even begin testing the idea and building on it, there are some fundamental questions you can answer. Through our work at Techstars, Dragons’ Den, and as early stage investors, we have found ourselves asking entrepreneurs the same set of questions repeatedly. While many of our conversations were short and detailed answers often weren’t forthcoming, we found that even the simple act of being asked the questions often helped the entrepreneur improve the idea.
It is not enough that you think your idea is a good idea. Others need to agree with you so that they will work with you either as partners, employees, investors, advisors, or customers. However, many entrepreneurs are afraid to share their idea with others for fear that it might be stolen. But as you’ll see in a moment, ideas need oxygen. In addition to engaging supporters and getting feedback, opening up ideas up and sharing them with trusted advisors as you are having the ideas can help evolve these ideas into something that you can build upon to create a startup.
Our goal with this book isn’t to replace existing methodologies. Instead, we want to complement them by giving you a context and a set of tools to help you evaluate your idea before you start putting any meaningful energy into it. Think of this exercise as the precursor to the Lean Startup or the Lean LaunchPad methodologies. We want this to be the book you read before diving into one of these methodologies, especially if you are a first-time entrepreneur.
The audience for this book isn’t just existing entrepreneurs or investors but a much larger class of readers—those who have yet to quit their jobs and take the leap into entrepreneurship. Hopefully, we will help you pick a better idea to build a startup around.
Trust Me, Your Idea Is Worthless
by Tim Ferriss1
Earth-shattering and world-changing ideas are a dime a dozen. In fact, that’s being too generous.
I’ve had hundreds of would-be entrepreneurs contact me with great news: They have the next big thing, but they can’t risk telling me (or anyone else) about it until I sign some form of idea insurance, usually a nondisclosure agreement (NDA). Like every other sensible investor on the planet, I decline the request to sign the NDA, forgoing the idea, often to the shock, awe, and dismay of the stunned entrepreneur.
Why do I avoid this conversation? Because entrepreneurs who behave this way clearly overvalue ideas and therefore, almost by definition, undervalue execution. Brainstorming is a risk-free, carefree activity. Entrepreneurship in the literal sense of “undertaking” is not. Strap on your seat belt if you’re signing up for a startup. It’s a high-velocity experience.
If you have a brilliant idea, it’s safe to assume that a few very smart people are working on the same thing, or are working on a different approach to solving the same problem. Just look at the number of different travel apps on your iPhone or the number of diet and exercise sites on the web for an example of this.
Overvaluing the idea is a red flag, particularly in the absence of tangible progress. Sure, I miss out on investing in some truly great ideas with this attitude, but that’s okay with me; I don’t invest in ideas. Nor does Warren Buffett. I’ll lose less money than those who do. I can largely control my downside by investing in good people who, even if they fail this go-round, will learn from mistakes and have other fundable ideas (ideas I’ll likely have access to as an early supporter). I do not have this advantage when investing in ideas.
One popular startup dictum worth remembering is “One can steal ideas, but no one can steal execution or passion.” Put in another light: There is no market for ideas. Think about it for a second: Have you tried selling an idea lately? Where would you go to sell it? Who would buy it? When there is no market, it is usually a very sure sign that there is no value.
Almost anyone can (and has!) come up with a great idea, but only a skilled entrepreneur can execute it. Skilled in this case doesn’t mean experienced; it means flexible and action-oriented, someone who recognizes that mistakes can often be corrected, but time lost postponing a decision is lost forever. Ideas, however necessary, are not sufficient. They are just an entry ticket to play the game.
Don’t shelter and protect your startup concept like it’s a nest egg. If it’s truly your only viable idea, you won’t have the creativity to adapt when needed (and it will be needed often) in negotiation or responding to competitors and customers. In this case, it’s better to call it quits before you start.
Your idea is probably being worked on by people just as smart as you are.
Focus on where most people balk and delay: exposing it to the real world. If you’re cut out for the ride, this is also where all the rewards and excitement live, right alongside the 800-pound gorillas and cliffside paths. That’s the fun of it.
David didn’t beat Goliath with a whiteboard. Go get among it, and prepare to bob and weave.
Note
1
Brad Feld and David Cohen,
Do More Faster: Techstars Lessons to Accelerate Your Startup
(Hoboken, NJ: John Wiley & Sons, 2010), pp. 3–5.
CHAPTER 1What Is a Startup?
The word startup has become an increasing part of the popular lexicon in the past few years. While it has been around for a while, it has recently become ubiquitous for those discussing entrepreneurship and new company creation. But not all new companies are startups.
There is a big difference between two types of entrepreneurial endeavors: (1) local businesses, also called SMEs (small- and medium-sized enterprises) or lifestyle businesses; and (2) high-growth companies, often referred to as startups or gazelles,1 a term first used by David Birch in 1979 and refined in 1994 to refer to companies with a minimum of $1 million of revenue that were at least doubling in size every four years.
Local businesses are what they sound like. These are the businesses that you find in your city whose customers are close to the business, such as the corner grocery, local bookstore, nonchain restaurant, or locally owned gas station. Occasionally these local businesses start to expand and turn into multigeography businesses, resulting in a large enterprise, but many are local businesses for the duration of their existence.
In contrast, high-growth companies rarely have a local focus. While they are often started in one location, and, at inception, usually only have a few people involved, the founders of these companies aspire to grow quickly, independent of geographic boundaries. Their customers are all over the world, and regardless of whether the company ever expands geographically, the business is rarely constrained by geography.
In the United States, until recently, all startups were referred to as small businesses. This is a historical artifact of the U.S. Small Business Administration, commonly referred to as the SBA. Until 2010, the U.S. government didn’t differentiate between types of entrepreneurial businesses. Thus, the SBA was helpful to some companies but useless to many others, especially the high-growth ones. Government at all levels (federal, state, and local) didn’t understand the potential impact of startups as a separate class of company, so all small businesses were lumped together.
In 2010, President Barack Obama announced Startup America2 and thus the word startup catapulted to the forefront of everyone’s mind. Through the support of the Case Foundation and the Kauffman Foundation, the Startup America Partnership was launched. This was a private partnership that executed a three-year plan, chaired by Steve Case (the founder of AOL) and led by Scott Case (unrelated to Steve), to define, support, and spread the message of startups throughout the United States.
Today, a startup is recognized as something distinct from a small business. For the definition of startup, we turn to the czar of customer development and grandfather of the Lean Startup movement, Steve Blank, who has coined what we think is the best definition for the term: A startup is a temporary organization formed to search for a repeatable and scalable business model.3
Let’s break down Steve’s definition and explore the different parts:
A temporary organization:
A startup does not last as a startup. It either goes out of business or succeeds in finding a solution that customers are willing to pay for.
To search:
The goal of a startup is to explore, test, and validate an unmet need. This definition recognizes that the startup lifecycle is finite.
Repeatable and scalable business model:
Initially, all startups are based on assumptions, with the goal of iterating until the assumptions have been validated. Once the business model has been proven and the startup is self-sustainable, it is no longer a startup.
Steve says this in another delightful way: “A startup is not a smaller version of a large company.”4 Instead, a startup is a series of experiments in search of a scalable business.
How to Use This Book
Our goal with this book is to help you figure out in advance which ideas are worth experimenting with. While this book is intended to be read from beginning to end, we have organized it so that you can read each chapter independently. We want to provide you with a structure to evaluate the idea you have in a formal and comprehensive way while allowing you to quickly think about the key issues that will come up.
We aren’t trying to create a new methodology for starting a company, nor are we trying to replace approaches like Lean Startup. Instead, we are taking a step back and engaging earlier in the process. This book is intended to be read before you read The Lean Startup or participate in a Lean LaunchPad process. We’ll provide plenty of context around different approaches and resources for getting your business off the ground, but our primary focus is in helping you with the prestartup, or the opportunity evaluation phase, when you are still deciding whether to put energy into the startup.
In addition to our perspectives, we’ve included examples from entrepreneurs and the investors who funded them at very early stages. Many of the examples are of companies that have grown substantially. By going back to a point in time near their inception, you can get a sense of how and why the entrepreneur and the investor decided to pursue the opportunity. Other sidebars include expert analysis from practitioners or academics of some of the more important elements in the opportunity evaluation process.
Our primary professional focus is in investing in high-growth startups. Brad’s experience, through Techstars and Foundry Group, is primarily in high-tech companies. Sean’s experience, through Dragons’ Den (Canada’s version of Shark Tank) and his own investing, is primarily in consumer products. To make this book applicable for anyone interested in starting a company, we’ve used examples from each of these domains.
Who This Book Is For
We wrote this book with first-time entrepreneurs in mind. However, we have received feedback from experienced entrepreneurs that this book has been helpful to them while thinking through their next opportunity.
As entrepreneurship engages a wider range of younger people in our society, we see a dramatic increase in entrepreneurial activities from high school and college students. This book is aimed at them and is intended to be used as a part of an entrepreneurship curriculum.
This book is for educators, particularly those teaching entrepreneurship and opportunity recognition and evaluation courses. If you are a teacher whose students often ask, “How do I know if my idea is worth pursuing?” then this book is for you.
This book is also for friends and family who support the entrepreneur on her complicated and challenging journey. If you are an entrepreneur, you can use it as a source of dialogue with your spouse, your siblings, your parents, and your children.5
This book is for fans of Dragons’ Den and Shark Tank. If you have wondered how the judges choose which companies to fund, you’ll enjoy this book.
This book is also for investors, especially angel and early-stage investors, as they try to better understand a new business. In the same way that the entrepreneur can use this book to help shape an opportunity, an investor can also use these concepts to help evaluate an opportunity.
Most of all, the book is for all those who have a passion for entrepreneurship, especially those of you who know that only the very best opportunities deserve your blood, sweat, and tears. Ideas may be worthless, but your time, energy, and focus are not. Friends only let friends work on great opportunities.
Notes
1
John Case, “The Gazelle Theory,”
Inc.,
May 15, 2001,
http://www.inc.com/magazine/20010515/22613.html
.
2
The White House’s Startup America homepage,
https://obamawhitehouse.archives.gov/economy/business/startup-america
.
3
Steve Blank, “What’s a Startup? First Principles,” Steve Blank’s blog, January 25, 2010,
http://steveblank.com/2010/01/25/whats-a-startup-first-principles/
.
4
Steve Blank, “A Startup Is Not a Smaller Version of a Large Company,” Steve Blank’s blog, January 25, 2010,
https://steveblank.com/2010/01/14/ a-startup-is-not-a-smaller-version-of-a-large-company/
.
5
Don’t forget your pets, especially if you have a rubber duck. For more perspective on the value of talking out loud to yourself, see
http://en.wikipedia
.
org/wiki/Rubber_duck_debuggin
.
CHAPTER 2The Democratization of Startups
Now is an amazing time to be an entrepreneur. Startup communities are being built all over the world. You don’t need significant capital to start a new business. Knowledge about how to start and scale companies is more prevalent than ever.
Twenty years ago, the Internet was starting to be used in a commercial way. Today, an entire generation has grown up net native, and people are living their lives online and unaware of a time when the world wasn’t interconnected by technology. The rapid change and increased availability of technology has radically impacted how companies are started and built. The dynamics around barriers to entry, especially in businesses that have constraints around communication and distribution, have shifted in favor of startups.
This applies no matter where you are located—from Silicon Valley to Berlin, from New York City to Iowa City. The emergence of concepts like the sharing economy, the growth of smartphone use and the accompanying app explosion, and the interconnectedness of many business functions are democratizing the ability to start a new company.
The Cost to Launch Is Approaching Zero
In the dot-com boom (1996–2001) software companies needed several million dollars of funding to buy equipment just to get started. There was no Google to help attract users, there was no PayPal to make payments frictionless, there was no AWS (Amazon Web Services) to remotely host your application, and there was no Shopify to build your e-commerce store. Just as it was with the early settlers in Alaska, there was no infrastructure to support nascent entrepreneurs. If you wanted to launch a jewelry business online in 1996, you not only had to have kickass jewelry, you had to build your own storefront and your own payment transaction engine, and you had to attract customers one at a time. Basically, you had to put all the pieces together yourself.
