Tag: Entrepreneurship

Paul Graham’s Newest Essay is a Must Read

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I’ve never written a post solely telling readers to read someone else’s work, but Paul Graham‘s newest essay called “What Startups are Really Like” is so good I’ll break my rule.  Graham is the founder of Y Combinator, a company that funds startups and gives them guidance, money and a community for to help them start their startup.  Graham emailed all of the founders of the companies Y Combinator has funded asking them what was the most surprising thing about their experience:

I’m in the unusual position of being able to test the essays I write about startups. I hope the ones on other topics are right, but I have no way to test them. The ones on startups get tested by about 70 people every 6 months.

So I sent all the founders an email asking what surprised them about starting a startup. This amounts to asking what I got wrong, because if I’d explained things well enough, nothing should have surprised them.

He took the most interesting responses and wrote an essay reacting to it.  If you run a startup, are interesting in starting one or are just interested in what entrepreneurs go through to start a company, this article is a must read.  Pretty much everything he says rings true to my experiences and would be advice I would give, so I will just let it stand on its own.

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Don’t Be Afraid of Competition

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I just got back from a trip to New York.  While I was there, I met with a promising entrepreneur who has a great startup that has been pretty successful so far.  He is in the middle of expanding his business nationwide.  We came upon the topic of competition and how to deal with it.  I realized that many people have some misconceptions about competition.

My advice was “don’t be afraid of competiton.”  I learned this lesson when I was running ExchangeHut and talked about it at last year’s Entrepreneurial Deli event in Madison.  While we were running ExchangeHut’s trading platform for college students, our biggest fear was that Facebook would launch a marketplace that would crush our competitive advantage.  When we heard that Facebook was launching its marketplace, we changed big parts of our strategy to react to the new competition that had yet to launch.

Big mistake.  When marketplace first launched, it was fairly useless and was not a competitor to our business.  We had changed some of our bigger plans because we were afraid of competition and did not expand as quickly as we had planned because of it.  Our competition did not hurt us.  My point is that you never know if your competition will actually be successful.  If you have a great idea, don’t immediately change your plans if you hear about competition.  Execute on your ideas and let the chips fall where they may.  If your idea is good and you execute well, you will be successful.

Another point on competition:  Don’t be afraid to get in contact with your competition.  This isn’t t say that you should tell your competitors (or the world) every last detail of your plans to conquer the world, but you should be on good terms with the other people and companies in your space.  We found that it paid off to get to know the other startups that were in our market.  We talked to just about everyone in our market.

We even ended up being able to work out some great deals with competition because we were on good terms with them and they knew we existed.  There really is no downside to being on good terms with the others in your market.  You never know when a great opportunity will present itself to you or one of your competitors that will be beneficial to both of you.  Plus, if you plan to start another company, these contacts will be valuable later.  If we had been afraid of competition and not talked to them, we would have missed out.  Moral of the story: don’t be afraid of competition, get to know them, but don’t tell them everything!

Every Startup Needs a Mentor Team

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Every startup that wants to succeed needs a mentor team.  These mentors don’t have to be a formal board of advisors, but they should be a diverse group of accomplished business people, lawyers and professors.  They don’t have to be experts in the area you are starting your company, but it would be useful to try to find one person who is.  You should be able to call or email them anytime you are stumped on a problem you are trying to deal with.  You should also be able to meet with them every 1-2 months to give progress reports and talk through your business.  Ideally your core team should consist of 3-5 people, but even 1 mentor is a huge help.

It’s important to have a mentor team for a bunch of reasons.  First, your mentors will be able to bring an outside perspective that isn’t as close to the business as you are as the founder.  Its amazing how many problems someone smart who is a little removed from your business can solve.  Second, having a mentor team builds credibility both with others in the business community like potential partners and customers and with potential investors.  When I look at startups, if the founder doesn’t have a mentor team, I start to wonder if their idea is any good or if the founder is totally committed.  Sort of like a partner, if the founder can’t find someone to like them and their idea enough to be a mentor, there might be something wrong with the idea or the team.  Third, mentor teams provide valuable insight into areas that founders many not have experience.  Whether its a tax question or how to approach investors or how to present to a partner company, people who are smart and have been successful before usually are able to help you out.

My mentor teams for my businesses have consisted of a lawyer, successful entrepreneurs, professors.  For my current company, my partner and I joined the MERLIN Mentors program here in Madison to add to our existing network of advisors and mentors.  If you are starting a company, see if there is a program like MERLIN in your area.  It is a great way to gain access to mentors who can help you succeed, especially if you don’t have an existing network.  If there isn’t a program, email interesting professors you find online or in your area.  Write a business plan and enter into a business plan competition.  Join LinkedIN and see if you have any connections who might be able to help you.  Ask your friends and family if they know anyone who might be interested in listening to your ideas.  Not only is it easier than you think to find a good mentor, it’s also one of the most important things a startup can do.  It doesn’t even cost any money!

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Entrepreneurs Come in All Shapes and Sizes

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I’ve been writing a lot about entrepreneurship lately, focusing on how it is easier than many people think and how people should view getting involved in a startup as a viable alternative to getting into the job market, especially during college and in this economy.  One of the most common responses to these posts have been “I’d love to start my own business, but I don’t know the first thing about technology” or “running a big technology startup is too hard and I don’t want to move to the coasts.”  I want to clear up this common misconception.

There are all kinds of entrepreneurs.  They come in all shapes and sizes and start all sorts of industries.  I think everyone agrees that high flying Silicon Valley tech startups and cutting edge biotech companies are clearly founded by entrepreneurs, but there are so many more examples of entrepreneurship that many people overlook.  Founders of small businesses like gas stations or restaurants are entrepreneurs.  So are people who start non-profits, people who start bands, artists who sell their paintings and people who create custom designed t-shirts.  Self-employed consultants, programmers and graphic designers are entrepreneurs.  So are people who sell parking on football Saturdays and Sundays around the country.  The examples are endless.

Jean-Baptiste Say, a French economist and the person who coined the word entrepreneur, defined an entrepreneur as someone who “undertakes an enterprise, acting as intermediary between capital and labour.”  I like his definition, but will add that an entrepreneur has to accept full responsibility for the endeavor’s success or failure.  All of these endeavors fit this definition.

Whenever I talk about entrepreneurship, I’m referring to all of these different ways to be an entrepreneur.  I think its critical for people who are thinking about starting something on their own to realize that they can be an entrepreneur and live the entrepreneurial lifestyle without raising hundreds of thousands of dollars, hiring huge amounts of employees and inventing something that will change the world.  These other types of entrepreneurship are just as important, if not more important, than many of the big high tech, high visibility startups that you hear about in most newspapers.  I think this distinction is really important and try to break it down whenever I talk with potential entrepreneurs.