There is a major difference between guesses and educated guesses. Starting an entrepreneurial venture, especially one aimed to make a significant difference in the marketplace with innovation and disruption, is based on a number of untested hypotheses. Traditionally, in building a new product or introducing a new service, untested hypotheses were assumed to be partially validated and only when we offer our solution that find out if we were right or wrong. Innovation in venture initiation, validation and growth methodologies suggest The Story. Instead of going all in, let us take it one step at a time, qualitatively validate the most urgent needs, use nonscalable resources for quantitative validation and build in response to customer demand. Empirical analyses of the outcome of this new Pull methodology have been limited mostly due to the lack of data because newly established companies take years to reach maturity and provide statistical insights. What can we learn from research so far and how can we relate it to our venture initiation methodology?
Knowledge: You’re more likely to succeed if you’ve failed than if you’ve never tried. In fact, founders of a previously failed business have a 20% chance of succeeding the next one. It is intuitive, right? The more you learn, the better your decisions become. What if I get mentored by those who failed a couple of times before succeeding? Yes, it is essential unless you turn into a decision executor rather than a decision maker. I lost faith in many of the ventures I started earlier in my career simply because I applied so much of the advice my mentors gave me that I lost interest in the vision and felt like it wasn’t my baby anymore. I then made the same mistake with the entrepreneurs I mentored even though I emphasize on the fact that I am a guide who’s investing few minutes with them periodically when they are investing all their time in it. A lot of those lessons you learn with failure. Research further shows that 95% of entrepreneurs have at least a bachelor’s degree. In my opinion, it isn’t just about the academic education you get but more about the turning events or aha moments you experience with your interactions, networking, exposure, lectures, connections and others. It is about those moments during a lecture, at the cafeteria, in the hallway, or at the library when you grab the first piece of the puzzle that you explore further and realize that it is what you meant to do; sometimes something completely different than what you thought you would be doing.
The Beginning: 98% of respondents to a research conducted by the Kauffman Foundation say that lack of willingness or ability to take risks is their biggest barrier to entrepreneurial venture initiation and success. Risk, unlike uncertainty, can be quantified or at least forecasted based on laws of statistics and probability. If risk is the biggest problem, what if we can quantify it and then figure out how to alleviate it? What if we can use nonscalable resources to validate the need for our solution before we commit any investment? We sure can. Visit Nonscalability for Validation.
Team & Validation: Most startups fail because of premature scaling. The most valuable asset in a startup is the team behind it. Building a strong foundation, that is, by making sure members have complementary skills, passion, belief in the vision, and are ready to fight for the success of the venture is what will allow you to endure hard times. Research shows that two founders significantly increases your odds of success. They create balance, motivation and shared responsibility. With this established, the second strongest layer of foundation is validation before scalability. In fact, rarely can you scale before validating the need for your solution unless you have some insights that allow you to predict what users really want and thus moving from opportunity to product development, launch and marketing right away. This is the biggest cause of failure unless you have millions of dollars in back up funding and hundreds of potential employees waiting to be trained and assigned. If you have a great product, take more time on building a strong foundation then on burning stages. Exponential growth will follow naturally.
A research conducted by Sage shows that the top three mistakes founders make are taking on too much debt, not performing enough market research ahead of time, and not controlling costs closely enough. They stress three areas founders should focus on to enhance their chances of success: marketing, business networking, and market research. I propose that founders should initially focus more on entrepreneurship and market knowledge (different business models, strategies, tactics, etc.), customer development (interaction with current and/or potential customers) and execution using nonscalable resources. In a survey I conducted this May, respondents consider funding to be their biggest problem in venture initiation. I call this: the funding fallacy. Funding is in my opinion the most important factor for growth and not the initiation and validation stages. Nonscalable resources can be used to move to later stages in the life of the company without or with minimal financial investment.
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