David Crow wrote a piece on the StartupNorth blog last week. It got my attention. I would like to refer our audience to it and to make comments.
Now, his post had nothing specific to do with our sector. However, it has everything to do with hundreds of entrepreneurs I have engaged with over the years in this sector alone.
I decided to respond to the post hoping many new entrepreneurs read more of those types of messages and a shift in mindset, as David Crow suggests, starts occurring in the industry. I have been involved in working with both startups and established companies across Canada and parts of the US for quite some time now. At times as an advisor, a consultant, investor, silent partner, etc.. Given my present role running the Canadian Deals Association, I have been engaged with probably a hundred startups in the past couple of years from across the country. I have also spent time with startups in Montreal regardless of sector. Given that involvement Here is what I noticed as it pertains to the concepts discussed in David Crow’s post.
- There are many entrepreneurs that I have met that are quite fantastic, aggressive, passionate, realistic and MATURE business-wise. These individuals do not grow on trees. They are as valuable as finding a great growth stock or undervalued stock. These individuals tend to succeed, regardless of the obstacles in their way…depending on circumstance some take more time than others and none expect handouts. These are the people that inspire me and I get a charge every time I work on projects with them.
- Now, there is also a very large percentage of what I call the “ROOT” entrepreneur. (Really Out Of Touch) These are young folks, they have talent, sure, they are smart, the majority are technical, and they have some ambition. But they have no business or corporate experience, no management experience both in being managed or managing others, and certainly no sales & marketing experience and their relationship building skills are worrisome. Our industry is full of such individuals who have launched something online but do not have the sales, marketing or business development know how to truly grow a prosperous business.
- Developers and/or Designers who have created something, a feature a product, does NOT make them entrepreneurs. The definition and reality of entrepreneurship or starting and growing a business is far more involved that simply developing a feature or product. I make this point simply because we are flooded with products to evaluate and asked to promote them to our industry. A product developed does not mean you’re in business.
- Now, what they do have more than anything else is a sense of absurd reality in which they believe they will be bought out, merged with or invested in at top Silicon Valley based valuations simply because, get this, “we spent thousands of hours building this product/feature.” Many are developers and designers who believe that just because they spent time developing something, that it automatically has value. That Google, Microsoft, Rogers, Torstar, amazon, etc will buy them or customers will be lining up to buy their product (feature), or investors will be amazed and give them money. I am as fascinated by their illusion of grandeur as I am dismayed by their lack of business maturity and realism. Finding the right founder to bet on is not easy. Finding someone with both tech skills, management skills, creativity and some sales & marketing ability is not evident. When found, however, the maturity, the research, the realistic expectation of what it takes to build a business of value is quite different.
- More entrepreneurs need to understand that you need to actually build value in your business and not just build code for it to be valuable. We recently received yet another request for assistance at selling a startup. However, after paragraphs of text, the founder “pitch” to me was all about how much time they spent coding the product and the technical aspects of the product. Hardly any points were made about the solution it solves, the clients the business has, the revenues it gained, the successes it achieved, etc. This startup founder then had the hubris to suggest that they would not accept anything lower than what I would call a retarded amount given my rather deep knowledge of this industry. How can one even reason with such an absurd point of view from a founder? It is one thing to have confidence in your product and the market it serves. It is another to have that confidence turn to arrogance and be blinded by the realities of the market place. This type of thinking is not an anomaly. There are way too many entrepreneurs who have simply designed or coded a product or feature and hardly have revenues or potential for growth and expect million dollar paydays simply because they “invested their time”. It’s as if they are trying to sell art at the highest bidder. Art being the code or design they developed. Sure, tech development can be artful, but it must first be functional.
- As intelligent as today’s entrepreneur is compared to decades ago, the lack of fundamental business savvy, sales and marketing ability, creativity and business development ability that I have personally witnessed is still astonishing. Sure, it is scary easy to launch a business these days, but the number one rule in any business still stands; how will it make money? How will it drive revenue? Without sales there is NO business and all too often I see well designed, or functional products developed that have no market because the founders have not figured out how they can drive revenue from the business. Now, there are some exceptions like audience based businesses that count audience as their sales metric, ie Twitter. Years before they figure out how to make money and years more before profitability sets in. But the whole startup and VC ecosystem cannot function on Twitter type scenarios.There must be focus on driving revenues.
- Over the years, the entire industry has created a system and a process of building “lean” startups, of turning the act of starting a business into a paint by numbers methodology. That is fine and works very well in several circumstances. However, what I also see is that this methodology has weeded out creativity, business development and good old fashioned business smarts. They have been processed out. The methodology attracts a certain type of entrepreneur and the lack of these business skills in the majority of the entrepreneurs I have come across is frustrating. These entrepreneur have a well design business plan…too well designed, an answer for everything, a system and a process for all parts of the development process of their product or feature. They have advisory boards, they have great linkedin profiles, they have confidence when you first meet them…. and then you start talking about some straight forward sales and marketing strategies and tactics, some business development scenarios, how will they obtain customers other than word of mouth, other than marketing on facebook, or buying google ads. And that’s where it falls apart for many tech entrepreneurs who have not surrounded themselves with the proper talent. (I do not mean to pick on tech entrepreneurs….that is simply the topic at hand. Those founders with business backgrounds and no tech ability also have their challenges. That is why those who have both abilities are coveted or startups with the right mix on the team are well regarded)
- Oh, and a little point that bothers the hell out of me. Entrepreneurs….listen! STOP calling yourself or putting the title CEO on your business card or Linkedin profile if you are 2-3 people in the fricken company! This makes you look inexperienced. CEOs manage other executives. So it is ok to have the goal of being CEO, but until you have other executives to manage…..the title Founder will do. Please!
Strong businesses do not take months to incubate. They take years. However, our entire entrepreneurial culture no longer has patience for years. We all want to see immediate returns. The Deals sector is no different.