Mentoring first-time founders is always interesting and familiar themes continue to emerge. One of the recurring themes I have seen is that new founders push all-in on bad hands.
What do I mean by that? Well, startup culture has been romanticized to a point where every possible or potential founder is coming out of the woodwork with the hope of a quick exit. The unfortunate byproduct is that many founders lack the critical skills to throw away bad ideas when they find themselves unable to scale, monetize, finance, etc. To my earlier analogy, they will go all-in on a bad hand instead of just folding and waiting for the next deal.
The concept of “failing fast” is a popular one in the startup world. The goal is to try to make an idea fail as fast as possible instead of investing too much into it. Many people have goals, but simply a goal without a plan is just a wish. In the interest of saving time and pain for existing and aspiring founders, I want to offer very basic, practical advice:
Before you consider a startup, evaluate your opportunity cost
If you created a company, obviously you are going to think you are going to join the “3 comma club”, or at least be a comfortable millionaire. What if you don’t? What is your opportunity cost if you don’t found your start up? Model it out for the next 5 or 10 years. Once you arrive upon a figure, use this as the baseline for what your ROI needs to be on your investment of time. If you have a job, you can do your due diligence after hours while still working. You can extend your potential timeline by delaying the amount of time without a salary.
Evaluate your intrinsic motivations
Why are you building this company? Do you want to solve a problem, do you want to be your own boss, do you want to make money? Understand what drives you, because in the dog days of running your company you will need these goals to help motivate you. Running a startup is a series of very high highs and very low lows. You will need to regulate your emotions and not get too ahead of yourself.
Your ideas are not new
Someone has thought of or tried what you are doing or proposing. Figure out who these companies are. Find out why they failed. Heck, connect with that founder on LinkedIn and ask them. You need to understand why your idea at this time will be different. Is it the way you are implementing the idea? Has something changed in the market? Are you in some way uniquely qualified to make it work?
Find a mentor
You need to empower someone you trust or admire to call bullshit on your ideas or approaches. Without a proper mechanism to vet your ideas it becomes very difficult for you to get objective feedback.
Test your ideas with other founders
Start socializing your ideas with other founders. Find founders in your community. However, before you start reviewing your ideas with them, consider the following points:
- Is this in the founders space: Do they have the experience to vet the idea. I find founders are so excited to share their idea, they sometimes get so caught up in telling others the idea, they don’t realize that the other founder may not be able to provide meaningful advice.
- Be respectful of their time: Come prepared, don’t ramble, show up on time and if you are meeting for a coffee, offer as a courtesy to buy the coffee. Not because founders need free coffee, but as a token that you appreciate their time.
- Have a next step in mind, but wait: Based upon what you present, a founder may have an idea of what to do next. You may have presented so poorly they want to run for the exit, but they might want to help. That could range anywhere from constructive feedback, to an introduction to more. Again don’t presume. Gauge interest and evaluate next steps. In your mind, this is the most important thing in the world, in their mind this is a courtesy 30 min coffee meeting.
- Start testing your idea and find ways to break it. You can test your idea by talking to prospective customers, anyone and everyone. Once you do a bit of informal testing, try to formalize it a bit more with informed surveys and other mechanisms.
- Let’s be honest with ourselves; building a company is like gambling. Like gambling we try to best maximize our odds. The difference is that instead of just betting on raw chance we are betting on ourselves and ability to bring an idea to fruition. There are many variables we can and can’t control. The advice provided above is to founders on the best footing to evaluate their idea, before they invest time and energy at the expense of other possibly better ideas.
Don’t be a Homer. Don’t make bad bets.
Joseph Puopolo is an entrepreneur and digital renaissance man in Waterloo.