Twice in the last month first-time Web-focused founders in my wheelhouse have stumbled over a common mistake that seasoned entrepreneurs would never let happen. They've turned to family, friends and colleagues to validate their launch plans. They think this activity follows the tenets of Web start-ups in having target markets validate concepts and in launching fast and cheap. Why not ask people in our marketplace to tell us what they think rather than hiring consultants and market research firms? The fallacy in this thinking and action is that these people are the wrong test market. Your first response to this premise might be that these folks don't want to crush your idea because of their relationship with you. And some do this. But in my experience, often an equal number generate concerns, questions and what-if suggestions, mostly lame. Why? Because they believe this is expected of them. Their minds say: "If the founder trusted me as a validator he or she must think I have some brainpower to help mold the launch. So, let's see? What thoughts can I create and say around concerns and ideas that make me sound smart?" Are any of these people truly representative of the fickle market that will stumble upon you, and know nothing about you, once you launch? Quite simply, no.
Here's one tale of the danger in this. A founder and his lieutenant were set to launch a Web service with a great URL that would instantly communicate its benefit. But then they asked family, friends and colleagues face-to-face and via an online survey what they thought of the business name. What came back were (expectedly) comments like: "Are you over-promising what you can deliver?" And: "How can you justify the quality claim your URL makes?"
What did they do? They huddled in their conference room for two weeks and filled the whiteboard with over-thinking about abandoning their launch plan with a new name and proposition. And they picked a new ho-hum name and URL. When I heard this and challenged them on this wimpy and wrong move, I offered the following: "On a Google search including the keywords embedded in your original URL, there are 622,000 results. On a search with the keywords in your new URL there are 124 results, most from a company that has branded one of the words. Do you think the 622,000 entities spent any time wringing their hands over their promise? And, by the way, here is how to add one bullet point to your homepage and one page to your site to explain your value in a few seconds."
Sunday
Reactions to Eight Warnings
As expected, I chatted/emailed with a few colleagues reacting to my glum post on warnings for first time entrepreneurs. Among those reacting were a recent global media co CEO, an investment banker, a VC, one of my go-go deals about to land a venture round, and a deal where the first time entrepreneur is hanging off the cliff by his fingernails.
Most had a similar question: If the odds are so tough, the money so tight, and target markets so fickle, is there any hope? And more pointedly: How can you take money or equity from deals when you don't think they'll survive?
Fair - and expected - questions. And the answer is this:
Some deals do succeed, obviously, so I'm not suggesting all first time entrepreneurs abandon hope. And, I do work for funded start-ups that may not make it, but I've had to become a realist in constantly reminding my clients and co-founders that we are facing tough odds. The two key reasons why most of these deals face the long odds is because they are hamstrung in not having access to the right teams, and they can not launch as quickly as the market demands.
More on the Right Team with the Right Stuff
Why Silicon Valley deals have such an advantage, in my experience, than my home state of Minnesota, and other places, is that founders almost always have the right stuff, a rarity in most other places (Boston, Seattle and Israel also have good pools of the right talent).
I stress that it must be a founding team, and the best is a two-person team, that has at least one person who has previously built and launched a company similar to their latest undertaking. It can't be advisors or board members like me with similar experiences (failures included) to improve the odds. Why? Because outsiders do not live and breathe the daily creating-order-from-chaos rigors of a start-up. And, too often, first timers can not bring themselves to act on outsiders' advice, especially when it's so foreign to their previous business experiences.
So, my key questions to first-time founders are these:
1. Has one of you on the founding team ever built, launched & sold your product/service, or engaged an audience successfully, in a similar venture aimed at a similar target market?
2. If the answer above is Yes, how likely are you to invest enough of your own capital, or acquire seed funding from confidants, to launch within 6 months, and hold on long enough to ask the Market how it will want you to adapt to survive?
Most had a similar question: If the odds are so tough, the money so tight, and target markets so fickle, is there any hope? And more pointedly: How can you take money or equity from deals when you don't think they'll survive?
Fair - and expected - questions. And the answer is this:
Some deals do succeed, obviously, so I'm not suggesting all first time entrepreneurs abandon hope. And, I do work for funded start-ups that may not make it, but I've had to become a realist in constantly reminding my clients and co-founders that we are facing tough odds. The two key reasons why most of these deals face the long odds is because they are hamstrung in not having access to the right teams, and they can not launch as quickly as the market demands.
More on the Right Team with the Right Stuff
Why Silicon Valley deals have such an advantage, in my experience, than my home state of Minnesota, and other places, is that founders almost always have the right stuff, a rarity in most other places (Boston, Seattle and Israel also have good pools of the right talent).
I stress that it must be a founding team, and the best is a two-person team, that has at least one person who has previously built and launched a company similar to their latest undertaking. It can't be advisors or board members like me with similar experiences (failures included) to improve the odds. Why? Because outsiders do not live and breathe the daily creating-order-from-chaos rigors of a start-up. And, too often, first timers can not bring themselves to act on outsiders' advice, especially when it's so foreign to their previous business experiences.
So, my key questions to first-time founders are these:
1. Has one of you on the founding team ever built, launched & sold your product/service, or engaged an audience successfully, in a similar venture aimed at a similar target market?
2. If the answer above is Yes, how likely are you to invest enough of your own capital, or acquire seed funding from confidants, to launch within 6 months, and hold on long enough to ask the Market how it will want you to adapt to survive?
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