Yesterday, the Founder's Journey class and Hemant Taneja weighed in on 5 key topics that are at the heart of entrepreneurship.
Co-founders must be people with complementary skills, who set aside personal agendas and focus on what's best for the company. The team is as important if not more important, than the idea. When co-founders begin to bicker in the early stages about "this is my domain, not yours", this portends trouble ahead. This then naturally raises the question of "At what level must the complementary skills of the co-founders come together?" Hemant responded to this saying co-founders need to have important conversations with each other such as time commitment to the start-up, equity sharing etc. early on, and work to create an environment where the founders can openly talk about it and not let it fester.
An entrepreneur must think through what is the unique value that their idea adds in the broader sense, and if they can build a viable business. It's important to be flexible and quick on your feet, and to know that the idea is going to change down the line. Accepting the inevitability of change beforehand will make the journey easier. For complex ideas that involve scientific research, it's particularly important to be adaptable so that if only a part of the original idea works, another product can be built around the core IP.
A good entrepreneur has the following hallmarks:
- Spends time thinking about the size of the market, looking at it from every conceivable angle.
- Understand what is the true value added for their customers, and if they will really pay?
- They are rigorous in their analyses, and are paranoid about anything that might affect their analyses.
- They can answer why now, why hasn’t it been done before, and why me?
- They understand the history of their space and can therefore project future trajectories
On validating ideas:
It's important to understand and acknowledge that somebody else’s eyes are better than yours, particularly if you have been looking at this for a while. It's very easy for founders to fall in love with their own ideas. Another important aspect is to understand defensibility of the idea. Sometimes, competition is some of the best validation an entrepreneur can get.
When validating an idea, it is often hard to know what are the right questions to ask. Responses from a focus group to questions such as “would you like a blue widget that does…” will be limited to the skill and imagination of the people who prepared the questions and is frequently not well suited to tech. start-ups. It's more instructive to observe people interact with a product and record their observations, which will not be fettered by the creator's imagination.
Another best practice when validating ideas is to try and find people who have failed before you, and ask them questions about it. Be open minded and go talk to people about your idea. Sometimes the best insights about the journey ahead come from those who have tried walking the path before. When talking to competitors, be upfront and honest. Talk about how you can make the pie bigger for both of you, and then go fight your individual battles when it’s time to acquire customers.
When there are IP concerns surrounding an idea, the strategy to gather feedback is to emphasize the benefits of the product. Show the audience the promise of the technology with measured results. Explain what the technology can do, and save the how its' done part for when NDAs have been signed and final stages of due diligence are in progress.
On team building:
It's critically important to be self-aware, and be a good judge of character. Always hire people smarter than you, and only invest in people who have conviction. When someone is not the right person for the job, do not hesitate to move them to the right role or fire them. The sooner this is done, the better. Create a good mix of people who are experts in the space along with newbies who bring a fresh perspective. When you bring in new people, be prepared to learn from them before they get brainwashed into your way of thinking and doing. Remember, these people were hired because they are smarter than you, so not to learn from them would be a loss!
Before seeking financing, have a clear idea of how the money you're seeking will be used. Convince yourself first that the money is going to be put to good use, and ask only for what you need! Then:
- Get introduced to an investor, ideally through the founders of one of their portfolio companies.
- Find a lawyer early on who believes in you and will give you some free advice.
- Always do due diligence on potential investors.
- Talk to a couple of the founders in whose companies the investors have invested. Pay attention to the kind of founders that were chosen by the investors, as well as the founders' take on their investors. This will be very informative.
- Lay out a trajectory of how the business is going to develop. Find an investor who agrees that these are the important milestones for your business, and is willing to invest to reach those milestones.
- Don't take money from an investor who seeks downside protection for himself. Your investor should believe in you.
- Finally, don't get involved in overly complicated financing deals.
- Find the smartest people in your space and bring them on board. Remember, if you don’t find them, someone else will.
- Identify mentors early, they are very important for bouncing ideas off of.
- Rope the investors into the process. It's a good idea to go to investors and seek advice early on. This will not only give the entrepreneur the benefit of wisdom from people who have seen several start-ups, it will also help build a relationship based on mutual trust that will be helpful when it's time to raise money.
- The importance of spending time with your customers can never be emphasized enough.
- It's important to have a strong company culture. Apply some foresight and emphasis on establishing company culture, it will stand the entrepreneur in good stead when the company is no longer just the founders.