Mistakes business students make when founding a startup
medium.com
medium.com
"I have a great service/app/whatever, where can I find a business person to get it to the market for X% equity?"
Now, when I have an idea I do an exhaustive search for keywords. I look for any data I can find that will tell me what the market would look like if I could get to the top. Almost every time I've done that, i've realized that there's very little people actually searching for the thneed I was going to build.
I've started to learn more about SEO, and marketing, but there's just SO MUCH I don't know, that I never considered, that having the right guy would help with. They really are an equal founder in my opinion. Building a product no one wants is a worthless activity.
1) learn the real-world problems of your idea through trial and error
2) if the idea does not become a profitable business, you reduce the risk that you will disappoint others and lose a lot of money that doesn't belong to you
3) develop technical skills that will be useful no matter the business outcome
From wikipedia:
>After graduating from Princeton in 1986, Bezos worked on Wall Street in the computer science field.[20] Then he worked on building a network for international trade for a company known as Fitel.[21] He next worked at Bankers Trust.[22] Later on he also worked on Internet-enabled business opportunities at D. E. Shaw & Co.[23]
What I was saying is that, in my experience, non-technical people who have studied at a business school tend to make the same mistakes when approaching their first startup.
This puts them at a disadvantage compared to others who haven't had the 'fortune' of attending a business school.
I'm sure there are exceptions to the rule.
Me and my friend (both business students) tried to start a business with having the Business Plan as our first step. It went to hell.
Now we started with validating the idea - selling! It worked soooo much better. More people should try that instead!
Sure, a 200 page document that takes you six months to write that you work on to the exclusion of everything else? Yeah that's bad.
However a short few pages on the idea, the target market, some guesstimates on sales targets, expenditure and so on is a small piece of work that in my experience can be very useful.
It gives you a document to go back to as a bad line for progress. What is measured can be improved and all that jazz. Also, just taking the time to scope out your business, even at a high level, will make you think about areas of work that a founder might not otherwise consider until it's too late.
I began to 'think on my feet' more as I got good at networking and listening. As I began to suss out demand, I realised that I would always be hampered by my limited coding ability. I had a friend who was doing the coding for our team, and as he went for a PhD, he encouraged me to go for a MSc. So I did!
Long story short. I'm studying CompSci and got in largely because of the late-night coding I was doing on the side of my regular job.
1. I don't agree with the general premise of the author.
a) I'm of the opinion that successful people are successful. Regardless of their background, if they have an idea, a goal, a desire, they'll make it happen. They make the leap from, "Want to go skydiving tomorrow?" to, "We're going skydiving tomorrow. Obviously this can't be true for everything they do, but they always demand success from themselves.
b) I can speak from personal experience going in the opposite direction. I started out technical, ended up biased towards the business side of the work when we sold. Business is tricky because the knowledge required (and applied) runs the full gamut of being so boringly easy (payroll and accounting) to mind-numbingly tricky (payroll and accounting). Jokes aside, the author seems to be herding all business students into the "marketing and sales role". There, you can only be good at your job if you have the guts to go out and get experience. For those who don't have the guts, networking is the alternative. It's much easier to pitch an idea to a group of friends than it is to pitch to an audience of strangers. As such, an MBA from Stanford makes perfect sense. Half of your friends from B-school are already VCs or Angels, why would you have to cold-sell to anyone else? (The converse is true also, an MBA from Stanford lets you get in on tech deals earlier.)
2. "The almost obligatory ‘I have a great idea, where can I find a developer to build it for me for X% equity?’ Facebook post."
The fourth option, not listed, is convincing the technical side that the idea is wonderful and that both sides are willing to sacrifice to get the job done. If the non-technical side is any good, that should be one of their primo skills. I've interacted with lots of amazing salespeople and by-golly they are amazing at making anything sound fun.
3. Writing a business plan.
Oh god. Please do it. There is nothing worse than seeing a promising company wander around in circles with no idea what's going on.
Not having a business plan may work out if:
a) You already have a secure source of funding and you don't care how long it's going to take to get to market.
b) Working on your idea has no opportunity cost (instead of playing video games, you're working on your idea).
4. Applying to startup competitions
I actually agree with the sentiment by the author here. I think that applying (or just working on an application) to a single, established competition/incubator is really useful (see business plan) because it forces the team to know their stuff. Applying to 50 just for publicity's sake is useless.
5. Hiring too quickly.
This may be different in Europe because laws there are very biased against the business when it comes to employment, but in the United States, debt is not a bad thing at all. In fact, using debt correctly allows for a win-win-win (business - investment - customer) situation. The business wins because it can bring product "x" to market 1 year earlier. It then uses revenue generated by "x" to fund "y". Repeat. The bank wins because interest collection is a thing. The customer wins because product "x" -- something which helps their life -- makes it to market a year earlier.
So yes, hiring too quickly is bad. Hiring quickly is really, really important. What's the difference between the two? I have no clue.
6. Your wage.
Most founders I know don't really care what they're being paid. They just want to see their idea take root. This applies to both technical and non-technical. You don't need school to teach you that: "Me need money to get food to eat". There are people from both sides who value a $400,000 luxury car over the success of the company, but those folks don't make it too far.
7. Lack of perseverance.
This applies to everyone.
The author's example of "scientists working for 3 years on research...without feedback" is certainly wrong. Along the way, their RA moderates their thinking, they publish papers and grants, they present at conferences. If that's not constant feedback, I have no idea what counts.
I didn't respond to all the points, but I didn't agree with most of them, the ones I named were just the most wrong in my opinion.
My first business my partner and I felt like impostors the whole time because we weren't raising millions of funding, we weren't renting huge offices or blitzing marketing, we simply were working to make our business better and make money faster. It's the most obvious thing, but it tends to be forgotten when dreaming too big too fast, and having all these business school lessons to lean on tend to make things even worse because they only confuse the situation at the earliest stages.
I'm not saying these aren't useful things to know, but first-time founders tend to lack awareness of where their company is in reality. The best person to work on a startup is the guy who knows how to make a buck from nothing, the guy who fixed computers when he was 12 or paid kids to make things he sold on Etsy when he was in high school or whatever. "Doing" gets harder and harder the more time you spend on "how to do things right."
I probably didn't do a good enough job of specifying either the kind of person or the phase of startup I was talking about - as you can no doubt tell by the quality of the writing it was written as a rant in one sitting.
To clear things up - I am still very convinced that the 10 points I wrote about are, broadly speaking, true for most business student founders with no technical experience, however in light of your feedback I will add two clarifying constraints/explanations:
1) I don't believe that business students are 'doomed' to fail as entrepreneurs. Rather, I believe that business school instills a number bad startup practices into the way that business students think, resulting in higher failure rates. Hopefully, by becoming aware of these 'mistakes/traps', business students who are founding a startup can save themselves time and energy which they need to keep momentum going.
2) I was writing with founders in mind who had not yet started up/were in the very first 2-3 months of working on their project. After 6 months (or maybe even earlier depending on traction), a lot of what I have written is no longer important/has successfully been navigated.
As a direct counter to your fourth option in point 2) --> if you don't have a personal friend who trusts you enough to build your product, can't pay someone to do it and haven't proven that you can do the non-technical things (to a certain extend marketing and sales, but of course also other things), why would any technical founder work together with you?
I have met quite a few hopeless non-technical founders with pretty good ideas (perhaps with a few tweaks). I have to confess to considering building their idea, but not with the hopeless founder as a partner...
E.g., I have an uncle who taught his sons selling, right, not for, say, P&G, GE, GF, UGE, IBM, but for his own business.
The son's business? Private label industrial floor cleaning supplies, major supplier for all of on US state. Why private label? Because the basic supplies are from a stable, old industry. The main issue is the one on one selling of those supplies to actual customers who actually use the supplies. So, the old industry that makes the supplies to fill some train of railroad tank cars is plenty eager to put the supplies in 55 gallon barrels or just 10 gallon buckets for the selling, with private label, my cousin did.
I have a childhood friend whose father taught him about selling. The father's business? Leading wholesale supplier of beer for about 1/4 of a US state. The son got an engineering degree, but he found that by far his best career opportunity was to take over the family business and use what his father taught him about selling, e.g., to small grocery stores, bars, restaurants, vendors at sporting events, etc.
I have a friend whose father taught him about selling. The father's business? Killed about 5000 hogs a day, chilled them overnight, cut them into pieces, put the pieces in boxes, put the boxes in 18 wheel refrigerated trucks, drove the trucks from the US Midwest to the US east coast. The selling? The father sat in his office in the Midwest with a head set and a spiral bound notebook and did the final selling. How to teach the son? For a start, when the son was 16, gave him the keys to a nice car and a credit card and sent him, alone, on a selling trip to each of the customers. Later the son started a business and was really good at selling.
Again, we're not talking marketing and sales for some business worth $100 billion but selling for some life style, family business.
Is there something to teach that is teachable and valuable? Darned right. E.g., in the first case, the son came home and told his dad that he had the order signed but, still, lost it. Why? Once he did get the order, trying for good customer relations, he stayed around the customer's office for a few minutes making small talk. Suddenly the guy who signed the order had some second thoughts. Lesson: When have the signed order, go away, go away nicely, but definitely go away, essentially ASAP.
Another lesson? When selling, emphasize your really good customer service. So, for the first order, have something wrong with it, say, some missing parts. When the customer calls, make a heroic effort, maybe drive all night and get there at start of business the next day, and hand deliver the missing parts with apologies. It worked.
There's lots of this stuff. If the father is really good at such selling, then there's lots of stuff he can pass down to his son that will work, well enough to be a big help in having the son have a nice standard of living and, e.g., pay full tuition for his children at some B-school where the professors circumvented the challenges of selling by being professors of marketing and sales at a B-school, and I used to be a B-school prof!