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Michael E. Gerber memorialized this concept many years ago in his classic book E-Myth, which postulates that most startups are initiated by entrepreneurs with technical skills, rather than business skills, resulting in a high failure rate. Since both skills are required in equal amounts for success, the single founder failure rate today is reported to far exceed 50 percent.
As an angel investor, I certainly see continuing evidence that this phenomenon hasn’t changed much in the past couple of decades. Technologists, in particular, who spend most of their time working in the business, rather than on it, still harbor several myths that contribute to their frequent demise:
"A great technology will lead a successful business." In fact, both
customers and investors often avoid the perceived high risk of innovative
technology pitches. Customers don’t like new learning curves or dealing with
unstable solutions. Early adopters love new technologies, but mass market
customers want solutions, not technology.
"If we design a great product, investors will find us." Technologists
forget that investors are buying a chunk of the business, not the product. Every
solution needs a business team first who knows how to market, distribute and
support the product. Investors want proof of a business model and real customer
revenue, as well as a product.
"Business work should start only after the product is done." Business
experts recommend that entrepreneurs start their marketing first to confirm that
they have real customer interest and an appealing product concept. In addition,
good marketing and support plans can take as long as product development. Do
both in parallel to be timely.
"Marketing is a necessary evil to sell weak solutions." In today’s
world of information overload, everyone relies on marketing and social media to
find solutions to match their needs. Even the best technical solutions often
fail due to lack of good marketing. For innovative solutions, marketing is the
education consumers need in lieu of experience.
"Paradigm-shift solutions have no competition." The real competition
to a new paradigm is the old paradigm. The first airplane faced major
competition from trains and automobiles. If there is no competition, investors
see no market, meaning no customers, slow growth and big marketing costs.
Mention paradigm shift only with other technologists.
- "Free solutions are the way to build critical mass quickly." For many customers, free implies no real brand value, so loyalty is low, and support costs can still be high. Thus you need deep pockets or generous investors before advertising or alternative revenue streams can kick in. Premium pricing with exclusivity is often a better business strategy.
The best entrepreneurial perspectives go well beyond the technology and making money, into an integrated vision of the world where satisfying a customer need leads to the greater good for the environment and society. They provide a personal legacy, satisfaction and happiness. The challenge is to maintain a balanced view between inside and outside business drivers.
Social media and the Internet are great channels to test your balance and overcome the myths and biases we all carry as startup founders. I recommend more time building the right team and the best business with the best solution will evolve naturally. Finally, make sure your investor story is as strong on the business elements as it is on the solution.
*** First published on Entrepreneur.com on 12/02/2015 ***