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Nowadays, entrepreneurship is a popular path, and the barriers to launching a company are lower than ever. What used to cost millions of dollars in servers for tech startups now has been reduced to $5,000.
Additionally, legislation is changing up the entire landscape of fundraising – from the way you are able to advertise your raise on venues such as Twitter or LinkedIn to (soon) being able to receive outside capital from investors that don’t qualify as accredited (only 1% of the US qualify).
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There is no doubt that the entrepreneurial life is glorified, and in our time of equity crowdfunding for startups at OneVest (formerly known as RockThePost), we’ve seen many myths about startup life that aspiring entrepreneurs hold to be true. Here are the 10 entrepreneurship myths we see the most.
1. Starting up a company is going to make you a millionaire.
With the popularity of Apple, Facebook, Google, etc., there are many stories of entrepreneurial success. It is a common fantasy for a company starting out in a dorm room or a garage to achieve viral growth, go public / have an exit, and create great wealth for the founding team.
However, the most successful startups don’t begin with the end goal of getting rich. These companies are out to solve a large problem, advance society, and create value.
The best entrepreneurs are the ones that create something from the ground up out of their frustration towards certain events they had to deal with in the past. They are out there to resolve massive problems, and out of that they unintentionally end up creating the next big thing.
If you begin a company just to get rich, chances are you won’t.
2. Founding teams are easy to build.
There is a lot of planning that needs to go into starting a company, but for many wishful entrepreneurs, this planning is excessive. They think they need to quit their day job, save up a significant amount of money, and have the perfect idea before taking the entrepreneurial plunge.
In reality, there is no perfect time to begin a company, and all it takes is the will and discipline to get something out there, learn, and iterate as you see fit. The quicker the better, as Eric Ries’ Lean Startup method introduces. All you need is a minimum viable product to test the market. First you will build the product with assumptions, and when you launch you will be able to further shape up the product with data.
The founding team is the single most important asset of a startup company upon which investment, growth, and success highly depends upon. Assembling a determined founding team who shares a common vision is needed, not easy, and you shouldn’t settle for anything less.
As the book “Good To Great” states, it is all a matter of having the right people in the right seats. Even though starting up a company is a journey into the unknown, if you have such people sitting in the bus, eventually it will find its own direction to success.
When you assemble a qualified founding team that you feel more than satisfied with, it is easy to get comfortable and think that they will be around until the end.
Unfortunately, situations can happen in which these key team members need to move on for one reason or another, and it is important to realize this possibility and be prepared.
In any case, don’t be greedy, and share the success. Make sure that all your colleagues have stock options with a vesting schedule of over 3 years so that everyone is equally vested in the long term success of the venture.
3. Competition can’t rise because you exist.
There are many conversations we’ve had in which somebody has an idea and desire to begin a company, but is unwilling to try because there is already a similar product/service on the market.
This shouldn’t be a blocker. Competition is healthy, and there are always gaps open in which you can capitalize on if you have the will to identify them.
Google, for example was the 80th company to enter the search space under the name BackRub. In the end it is all a matter of doing things better and faster than your competitors with the idea of giving the best customer experience in your industry.
On the other hand, the likely reality is that your company is not the only one operating in the market. As Mark Cuban states, there are at least 100 other people who have thought about your same idea. It is important to have a sense of confidence, but it is also critical to pay attention to the competition and continue to push the envelope.
Also, remember that it is not about the idea, The potential success always relies on the way your team executes in order to accomplish significant milestones.
4. Your product needs to be perfect before launching
We speak with countless entrepreneurs and hear hundreds of early stage pitches at RockThePost, and it’s frequent that the entrepreneur is waiting for the perfect time to launch their product. They envision this grand concept of what their company is going to be, and don’t plan to enter the market before then.
While this idealistic view and vision of an end goal for your product is great, it is a huge mistake to wait until perfection to get it on the market. By releasing a minimum viable product that tests the basic assumptions you need to move forward, you will be able to find validation in your efforts or see that you need to pivot before it is too late.
5. Failure means game over.
It is highly unlikely that any given entrepreneur will hit a home run on their first step up to bat. Failure is a very probable possibility, and can happen in multiple scenarios.
Failure in one way or another is a stage in any given entrepreneurial journey, and it does not mean game over. In many successful companies, failure has shown itself as a blessing in disguise – teaching the founder a vital lesson that ultimately led to success.
Startup Anonymous, where many founders share their failures, is a good venue to learn from the mistakes of others in order to avoid them during your journey.
6. Working long hours means making progress
Startups don’t operate under traditional “9 to 5” hours of that seem commonplace in the professional world. A lot of blood, sweat, and tears go into getting a company off the ground, and with that comes long hours and many sacrifices.
You don’t have to “live in the office,” however. Productivity means producing, and everything produced in a startup needs to be of high quality. Rather than aimlessly spending hours in the office, maintaining a healthy mental state and finding a sense of balance often leads to more productivity.
Keep in mind, though, that there is a lot of hard work and dedication behind every success stories. Bill Gates has stated several times that during his 20s he never went on vacation. Success stories don’t happen overnight – just like the founder of Pinterest states, his venture was an overnight success of 5 years.
7. You’re just in the “pre-revenue” stage, and monetization will come later.
Stories of high valued tech companies like Snapchat, Instagram, Twitter, etc., give off a perception that acquiring a massive user base is a substitute for a reliable revenue stream.
No doubt, a user-base is critical, serves as a large asset, and makes it easier to raise funds, but you can’t ignore your business model and write off the need to monetize because you’re simply “pre-revenue.” The last thing you want to happen is to spend a significant amount of time building a product that garners traction, but are unable to keep the lights on when you end up not being able to sustain yourself and raise further funds.
Now more than ever, institutional funds are looking closer into the revenue streams. Many of them have set limits of $500K and $1M in revenues before they decide in taking a conversation further and explore the possibility of injecting millions of dollars.
8. Once you’re funded, you can get comfortable.
There’s no feeling like getting funded for the first time. You have inspired somebody to believe in you, and you have the power to decide the fate of your own creation. Getting institutional funding is even more exciting, as you are now validated, and can further develop a culture that’s shared amongst like-minded employees.
Funding shouldn’t make you comfortable, though. Rather, funding should tell you that it’s game on, and there’s no time to play around. Improper use of funding (more than generous founder salaries, excessive marketing, unnecessary leisure expenditures, etc), can lead to the downfall of any startup.
Moreover, with funding comes accountability. Investors are going to hold you accountable for hitting milestones. In addition, some of them may want a seat on your board, and may influence in the future direction of your company. Remember that investors are like a marriage. It is very hard to break such relationships and part ways. Before receiving outside capital, do your due diligence and verify that you are ready to take the funding.
9. Your assumptions are correct.
Startups are full of assumptions – assuming your product / service is needed, assuming your financial projections are realistic, assuming the features in your development pipeline will be used, etc.
Assumptions are dangerous, as they implant in your mind an ideal reality that has not yet been achieved. It is important to have a vision and story to tell, as startup pitching is built around convincing others of your assumptions, but you always need to be aware of the present and constantly validating your efforts in moving forward.
Startups are all about the possibility of the future that you are trying to create. As Paul Graham mentioned, launching a startup is living in the future and building whatever is missing. However, that future can be dangerous and it is critical that you are grounded and that you understand the “what so?” in the story that you are putting together.
10. External critics should be ignored.
In startup life, not everybody is a supporter. In fact, many people will tell you that you won’t succeed, and expect you to fail.
These blind negative words should be ignored. What should not be ignored is when a user, potential investor, team member, etc., gives you constructive criticism on any aspect of your business. You need to see your work from an objective point of view so you know what you need to improve. You will learn more from the angry costumers than from the satisfied ones.
Additionally, many investors will turn you down during the fundraising efforts. Make sure you fully understand the reasons behind the investor rejection, and take them as feedback to improve what you are doing.
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