funding

The Entrepreneur’s Mirage

by Travis Ketchum · 0 comments

With the announcement that The Social Network has won best picture in the golden globes, there is even more buzz than ever about people who feel like anyone can start a multi-billion dollar business. With reports of Facebook stock trading around a $70 Billion dollar valuation and Groupon preparing an IPO at $15 Billion – these entrepreneurs seem like absolute geniuses. The reality of the situation is however, much different than the media has portrayed.

1. Dumb luck meets opportunity

While I think Mark Zuckerberg is a bright guy (although he comes off very arrogant at times), Facebook would only be a shadow of what it is today without the help of Sean Parker of Napster fame. Sean is one of the driving forces behind subtle things such as changing from TheFacebook to just Facebook; to much larger things like the billion dollar contact list he carries which ultimately got Facebook the funding it needed to continue its upward ramp.

2. We are in a bubble

Being an entrepreneur myself I can sometimes be turned into a cynic instead of just seeing the blind optimism that often infects those built of our breed. I have been guilty of that far too often myself, and while I certainly think that entrepreneurs should be championed, we also need to occasionally step back and see what is going on in the marketplace and understand that bubbles happen and try to counter the inevitable “losses” that will eventually happen.

The kind of valuations that companies are getting right now are absurd, and stories of things such as Groupon attempting to acquire Hipster.com for a sub $10 million range BEFORE IT EVEN LAUNCHES are insanity. While this is fantastic news for companies who bring real value and innovation to the table, by offering them a chance to get the funding they need to keep going it creates a problem for the marketplace as a whole.

High valuations and easy liquidity for companies also means that a lot of stupid and redundant ideas are getting funded. This may not seem bad on the surface, and creates temporary jobs. However, those jobs are not needed and create an artificially good economy when there isn’t enough value to support it. As the cycle of bubbles starts to come down from emotional decisions to decisions based on metrics and returns these companies will get axed, liquidity will dry up and we will be in a tougher place than we started once again.

Axe the Business Plan

by Travis Ketchum · 0 comments

business-plan-writer

Think you need a business plan to have a successful website/web service? The statistics would actually indicate otherwise, as the most successful websites were from people who were able to ship a product out of the door for an audience to start using and then iterate upon.

“Winners Ship”

This is what I keep hearing like a broken record from people who know what it takes to make it work online. Are you worried about having all the features your clients might ever want? You are going about it completely wrong, what you should be doing is focusing on key features that work – and work really well. Beyond adding clutter and delaying your launch, feature bloat can actually detract from whatever primary pain point your service is supposed to alleviate.

Pick the top 3 or so features that are core to your service working and make sure that the value of each feature is incredibly clear so that a user has no doubts at all as to WHY your service exists in the first place. If a customer can’t quickly identify the value in your service then all is lost anyway.

Link > Plan

So if you axe the business plan and try to not over think your new service, how are you supposed to go out and try to acquire funding for your start-up? Y Combinator jokingly says that they value a company by “adding 500k in value for each engineer and subtracting 250k for each MBA” because investors today want to see progress on an idea, not just a bunch of words around how good an idea might be. So what do investors care about these days instead of just a business plan? A link to a (mostly) working product that has a little bit of traction in the marketplace. The cost barrier to entry for a new web service has been lowered to much that investors need to see this level of success before investing because they have the luxury of being more picky.