iHub By Joseph / March 6, 2014
Why calling yourself a Startup could be Killing your Business
Guest Post By Alex Muriu
If you get to know me well enough, you will realize that I like reading. A lot. I read everything, from Menus to Advertorials to Spam emails to e-Books. The primary reason I think is I am naturally curious, sometimes to my own detriment, but so far nothing fatal; Evidently.
My current obsession is a book called ReWork, by Jason Fried. Jason is one of the co-founders of a company called 37Signals, the makers of a project management platform called Basecamp, with 15 Million users across the world. Basecamp is as old as Google, but still has less than 50 people on its Payroll; not because they can’t afford more, but because they want it that way. In Silicon Valley terms, Basecamp is like a really old startup. Jason refutes all popular beliefs regarding management and business growth. Ironically, his Business is a case Study in the Havard Business Review, in very good light.
Jason’s definition of a Startup
Jason defines Startups as, “…a place where you can spend other people’s money until you figure out a way to make your own.”
He goes on to say, “…a ‘we will figure out how to profit in the future’ attitude to business…That’s like building a rocket ship but starting off by saying, ‘Let’s pretend gravity doesn’t exist.’”
Question: When does the rubber meet the road?
Answer: When you pull out of the Garage.
In other words, not unless you are still operating in your Mother’s garage, its time to shed off the Startup tag and become a real Business.
It took me 7 years, and four failed Startups to learn this lesson
When I started my first company, all I could hear was, ‘how nice, such a young boy running his own business’. I wallowed in this miasma for three years, doing business off the goodwill of my friends and mentors. It was great because it paid for my way through college, but over and above that, that company was never going any further.
By the time I started my second Startup, the wave of Tech competitions was just beginning, and I remember how ecstatic I was on making it into the top 25 list of the Premier Pivot 25 competition. The interest we received from the Investor community was amazing. We got an offer from a Nigerian Investor that a few email exchanges later never went anywhere. My co-founders all got Jobs (as did I) in the Safaricoms of this world as Engineers, and our little Startup became nothing more than a bragging right.
Then came the era of ‘Tenderpreneurs’ as coined by one Local Columnist. A friend of mine and I saw an opportunity. Kshs 25,000 later, we had a company registered and started buying daily newspapers looking for the next big Government Tender. It didn’t take long for us to realize that in that world, you needed to know someone who knew someone who knew someone, not to mention the many players who would ‘eat something’ in exchange for handing you the Tender. Long story short, I don’t like talking much about this one.
My fourth and last startup attracted overwhelming international attention, flew me across an Ocean (all expenses paid of course) and got me in the same room with some very important Global leaders. At least I get to tell stories about my experience in Cities around the world. But strictly speaking, that’s as far as the journey goes so far.
A Startup has an Ideal; A Business has a path to Profit
If you consider yourself to be doing well because you won money in a few Tech competitions and travelled the world showcasing your world changing Tech idea, I got news for you. You are killing your Business.
Startups get a lot of attention; Businesses get a lot of Bills.
If a few influential minds have told you that yours could be the game changer the industry has been waiting for, and you fell for it, I got news for you. You are killing your Business.
Startups celebrate Users. Businesses celebrate Revenue.
I remember an advisor telling me, ‘Investors want to see that you have gotten your product into the market. Even if its just 100 users, as long as people are using your product, you have a shot’. If you ever got such advise and are following it, I got news for you. You are killing your business.
Startups look for investors. Businesses look for customers
It’s simple math really; An investor will give you a million dollars. A million customers will give you a hundred million, and won’t take shares in your company. Are you still looking for an Investor? I got news for you. You are killing your business.
7 years and 4 startups later, I’m now running my first business. Its not flashy, its not stirring a buzz, and it hasn’t flown me across any oceans or won any awards yet. But it pays its bills, has something you could call a balance sheet, has revenue targets and directors to answer to.
I will leave you with another quote from Jason’s book,”…don’t use the idea of a startup as a crutch. Instead, start an actual business. Actual businesses have to deal with actual things like bills and payroll. Actual businesses worry about profit from day one. Actual businesses don’t mask deep problems by saying, ‘It’s OK, we’re a startup.’ Act like an actual business and you’ll have a much better shot at succeeding.
All the best.
Cartoon source from http://www.robcottingham.ca/cartoon/archive/the-big-leap/
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Eric at 10:33:54AM Monday, March 10, 2014
Preach Alex! Look for customers not investor cash. Although I do believe there is a place for investor cash. Though its a little difficult to come up with general rules as to when and under what terms.Reply
George at 12:19:18PM Monday, March 10, 2014
Very nice article, very nice…Reply
MtuKabaka at 14:28:13PM Monday, March 10, 2014
Kamau Wanyoike at 16:33:04PM Monday, March 10, 2014
You are right on the money, and your advise is so current if others will heed. There is a dearth of this kind of advise in the tech space in Kenya. Three startups later I know that full well. Thankfully we learnt our lessons and currently working hard to buying back our shares from investors. Meanwhile we are dutifuly paying our bills.
Zack at 20:11:17PM Monday, March 10, 2014
so right I also was flown across the ocean to the tech shangrilah… Googleplex ….two years later many dead ends …Reply
and just jana a friend told me he saw a simmilar idea to mine being presented at shark tank big ouch!
Angel Investors: The Good, the Bad and the Ugly at 12:38:03PM Thursday, April 17, 2014
[…] guess you are wondering if it gets any worse than that. I previously wrote an article in this blog on lessons I had learnt from running four startups. Be sure to check it […]Reply
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