(Editor’s note: Patrick Driessen is the CEO of Seed Accelerator, an Asian-Pacific technology startup & business accelerator. He submitted this story to VentureBeat.)
Having spent more than 20 years as an entrepreneur, I’ve seen a lot of theories, philosophies and truisms come and go. Success in the startup world starts long before your company is underway, though. It begins when you’re making the decision on whether the entrepreneurial life is for you.
Last week, I ran down 8 questions people making the leap should ask themselves. Today, I have seven more…
Can you create enough sources of funding? – Startups cost money – and odds are you don’t have enough in your bank account. You may not need a lot of cash on day one, but you need to start planning for it from the outset. In some cases, trustworthy friends and/or family members might be willing to lend you money or take an equity stake in your business. But if not, you’ll need to get access to angel investors and actively build a relationship with them or personally get to know the loan and/or branch manager at your bank.
Other options (perhaps less likely) include arranging an introduction to an outstanding venture capitalist or building up a relationship with clients that are willing to fund some of growth without requiring an equity stake.
Are you a people leader? – Once you start growing, you’ll need a team. To build one, you’ll need to be able to select, hire, retain and utilize the best people. It helps to have experience, but it’s not essential. And keep in mind that even rusty leadership skills can be improved.
Can you deal with failure? – Not every startup succeeds. And even those that do sometimes face many difficult and unexpected challenges. To survive this, you must learn to accept and overcome failure, forgive others and believe in yourself and your business.
Can you evolve? – As the founder of a fast growing business you will have to be multi-functional. While growing your business you will need to develop new skills and strengthen existing ones. If you’re the proverbial old dog who won’t learn new tricks, you’re not going to make it.
What’s your exit strategy? – You’re responsible for your business from start to finish – so where is the finish line? When and how do you want to exit your company? Do you want to sell it? Merge? Go public? Hand it over to your children?
It’s hard to see the end of the path when you’re just getting started – and this may be one of those issues you’ll have to pivot on, but by thinking about how you’d like things to end, it gives you a purpose and motivation. And it could help as you set plans for your company’s future.
What’s your company worth? -A successful entrepreneur knows the value of his or her company at any point in time. He or she also knows what kind of unique value he or she wants to create, which is often based on their exit strategy.
Knowing your company’s worth (and having an ideal exit strategy) will help determine if the time is right when you have an opportunity presents itself. If you know there’s still growth potential to create more unique value, it could affect your decision.
Who’s your coach and mentor? – The startup path is a long, often lonely, one. Many successful leaders have a coach and mentor to help them along the way. They not only help increase your performance, they can offer sage advice that can enhance your quality of life.
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"The idea of the lone genius who has the eureka moment where they suddenly get a great idea that changes the world is not just the exception, but almost nonexistent," says Steven Johnson, author of "Where Good Ideas Come From: The Natural History of Innovation." That's because innovation, whatever the Facebook movie told you, isn't really about individuals. And in making it about individuals, we misunderstand, and thus impede, innovation.
I was not born physically or mentally superior to my grandparents. But I would have been much likelier to invent Facebook than they were. The natural capabilities of human beings don't change much from year to year, but their environments do, and so do the technology and store of knowledge they can access. Better sanitation lets people live in cities, where they can learn from one another. Transportation and communication advances allow ideas to mingle across distances that, a thousand years ago, they would never have traversed. The development of the Internet makes the coding of social networks possible.
When these advances happen, they happen to many people simultaneously, so many people tend to see the next step forward at the same time. In 2003, we were all social network geniuses, at least compared with everyone in 1993.
Consider CU Community, a Facebook competitor started at Columbia University. Adam Goldberg, its creator, programmed his social network over the summer in 2003. It was more advanced than Facebook, with options for pictures and integrated blogging software, though it did lack the elegant minimalism of Zuckerberg's design. (Disclosure: Washington Post Co. Chairman Donald E. Graham is on Facebook's board, and The Post markets itself on Facebook.)
Today, Zuckerberg is many times as rich as Goldberg. He won. Zuckerberg's dominance can be attributed partly to the clean interface of his site, partly to the cachet of the Harvard name and partly to luck. But the difference between Mark Zuckerberg and Adam Goldberg was very small, while the difference between what Mark Zuckerberg could do and what the smartest college kid in 1999 could do was huge. It was the commons supporting them both that really mattered. But the focus on individuals leads us to overinvest in the rewards for individual innovation and underinvest in the intellectual commons that make those innovations possible. We're investing, in other words, in the difference between Zuckerberg and Goldberg rather than the advances that brought them into competition.
Consider the current debates in Congress. Republicans are fighting to add $700 billion to the deficit to extend the Bush tax cuts for income above $250,000. It is hard to imagine the innovations that happen at a 35 percent tax rate for your two-hundred-thousand-and-fifty-first dollar, but not at 39 percent. We're also helping creators and their heirs hold legal monopolies on innovations for much longer, extending individual copyrights to the life of the author plus 70 years, for instance. Would we lose so many great ideas if the monopoly lasted only until 15 years after the inventor's death?
At the same time, the recession has broken the back of state budgets. California is gutting its flagship system of universities. Salaries are dropping, and research money is drying up. And California is not alone. According to the Center on Budget and Policy Priorities, 43 states have cut funding for higher education, while 33 others -- plus the District of Columbia -- have hacked away at K-12. And Congress seems to have given up on the energy and climate bill that could've kick-started our green energy industry -- even as China has committed almost a trillion dollars in green energy funding over the next decade.
And let's not kid ourselves into thinking that public investments don't matter. Direct public investment was crucial for developing a national railroad system, planes and semiconductors. It was behind the Internet and the Global Positioning System. It was behind the educated populace that developed those innovations.
Nor should we be overly sanguine about the private sector's interest in innovation. The average company spends 2.6 percent of its budget on research and development, and a National Science Foundation survey found that only 9 percent of companies reported a product innovation between 2006 and 2008. "You can't be an innovative economy if only 9 percent of your companies are innovating," economist Michael Mandel wrote.
People have many incentives to innovate. They love what they're doing. They're competing with others. They want to make money. They want, as Zuckerberg does in the film, to "make something cool." And they should be richly rewarded for their successes.
But there really isn't a replacement for public investment, and good rules. You need a good education system. You need intellectual-property rules that ensure space for new ideas and uses. You need a tax code that encourages research and development spending. You need, in other words, to furnish people with an environment in which innovation can take place.
We need to think harder about whether we want to spend our limited dollars on the vision of innovation in the Facebook movie or the reality of innovation behind Facebook.
Photo credit: Paul Sakuma/Associated Press
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