Entrepreneurship is creation.
Entrepreneurship is for the observer, opportunist and doer. The smartest, brightest and most educated are not always the most successful entrepreneurs.
Entrepreneurship is a lifestyle.
Entrepreneurship is the 10-year overnight success.
This guide looks into many years ahead of your entrepreneurial journey to lay the foundation, set the expectation and make sense of the case studies we read, success stories we hear, and challenges we may have faced and should be ready to face in the future.
What got us here in the first place? why entrepreneurship?
This is by far the most important question any entrepreneur can ask: why entrepreneurship? did you ever sit down to think about the real answer to the question? the real answer is often not our first answer which may sound something like: these college kids are making millions with no experience whatsoever why can’t I do the same? or, I’m smarter and more educated than my boss, why can’t I build my own company? or, this startup is worth billions, why can’t I use their approach to build a startup in a different space? etc. The answer to these questions often build wantrepreneurs and not entrepreneurs.
Wantrepreneurs want to do many things but end up doing nothing or a little bit of something that never turns into anything. Entrepreneurs are observers, opportunists and doers.
Again, why entrepreneurship? what got you to think about entrepreneurship for longer than when you learned how lucrative it can be to be a medical surgeon, lawyer, CEO of a big corporation, or investment banker? why entrepreneurship? A conscious knowledge of one’s own character, feelings, motives, and desires, also known as self-awareness, contributes extensively to the success of an entrepreneur.
Some classify entrepreneurs as a unique breed; they’re born this way. Others strongly believe entrepreneurship is taught regardless of entrepreneurs’ genetic characteristics and personality traits. Others argue for both. Researchers and scientists in genetics, psychology and management spent over a century trying to study and understand the background of entrepreneurs. Regardless of who you are, entrepreneurship is for the observers, opportunists and doers. But who are you and what motivated you to want to build an entrepreneurial career?
Self-awareness and inner motivation are your long-term drivers. When you know exactly what everything is tied to, you know why things are happening and where they will be many years into the future. When your answer to why entrepreneurship is the influence of success stories, money, power, and freedom, you are driven by external events that will likely motivate you for a short period which inevitably turns into a disappointment.
Almost 7 years into entrepreneurship, I am now a thousand percent convinced that entrepreneurial success cannot be hacked. There is no way around building value in exchange of value and this takes time, work, persistence and perseverance.
It was after my first startup and halfway through my second one when I stepped back to learn more about my motivations, expectations and who I really am. It was then when I learned that my biggest motivation in life is “the difference.” I qualify the difference I make with everything I do: greet, host, sell, teach, serve, speak, etc. I realized that one of the main reasons behind my interest in entrepreneurship is the opportunity I have to make a bigger difference. To narrow my interest, I realized how a few lines of code can make such a big impact in people’s lives. I am fully committed to entrepreneurship because it enables me to make a bigger difference in the world. This has been the biggest motivator. It all started by reading success stories of entrepreneurs my age and younger building million dollar companies overnight but when the euphoria turned to realism, I went back to the foundation with success stories being the consequence and not the reason.
One of my good friends is pursuing a career in medicine. I asked him why medicine? I was expecting an answer around money, respect and recognition. He said, you have no idea how good it feels when you see a patient with sad and scary eyes that turn into happiness, hope and satisfaction after my treatment.
Why entrepreneurship? find the real reasons and motivations today; they will drive your 10-year overnight success.
This guide is a little bit about your future as an entrepreneur. Almost all the phases and events I share with you here will take place in one way or another. In the end, your road map should be a lot clearer, to say the least.
Three of every founder’s most joyful periods in entrepreneurship are: when they decide to purse their entrepreneurial dream, 2) when they generate the first dollar, and 3) when they reach the end result: sell the company, take it public, live independently, build a brand, or any other personal goals.
It all starts with a dream and a motivation. The long sleepless hours thinking about how the sky is the limit, how you no longer will have to deal with or worry about XYZ (job, debt, etc.), how you will be able to make a bigger impact while being rewarded for it. The head is spinning and the adrenaline is pumping into your bloodstream. This is the first joyful period every entrepreneur lives at least once. It’s a period of uniformed optimism with excitement about what we’re about to get into, but don’t really know what’s coming ahead until we do. Then we start to ask, what if I can’t do it? what if I don’t do it? what about my current responsibilities? where do I start? too many questions and very little answers.
Realism And Awakening
Wouldn’t every rational person pursue a career in entrepreneurship if it was as easy as building and advertising a product? they would, regardless of whether they were meant to be entrepreneurs, have interest in entrepreneurship or know anything about building companies. But fortunately for some and unfortunately for others, this is not the case.
No matter how much thinking and self-awareness exercises we do, we will almost always be trapped in the belief that if Whatsapp, Instagram, Snapshat, Facebook, Airbnb and Uber founders built multibillion dollar companies in a couple of years, so can we. And Yes, so can we so why don’t we do it? this is the realism and awakening phase. First, we make the mistake of selecting the outliers as a benchmark. Second, we underestimate the resources invested in these companies for them to reach this level of success. And finally, we don’t know the struggles that the founding teams went through before initiating and growing their disruptive companies such as Whatsapp founder being denied an engineering job by Zuckerberg before he built a company that got acquired by Facebook for $19.5 billion 3 years later.
In the realism and awakening phase, potential entrepreneurs recognize that the entrepreneurial journey is not as linear as they imagined and the numbers back it up with over 90% failure rate. What would a rational person do here? keep or get a job? keep it, no? common sense. What would an entrepreneur do here? think about the 10% success rate, no? crazy but Yes. The dreamer talks about current responsibilities, debt, lack of time, and family while believers, who often face the same challenges and yet, still willing to learn, explore, evaluate and progress.
Regardless of who you are, you still can’t know: DO NOT QUIT because you don’t know enough. You haven’t acquired enough knowledge to make an informed decision about an entrepreneurial future you don’t know how to build. You still don’t know what you can do to minimize risk, reduce investment, generate revenue sooner, get outside help fast and inexpensively, etc. You acknowledged the challenge and risk but not the opportunity and tricks.
Not every potential entrepreneur will read this guide or have a mentor at this stage so guess what, most will quit which puts you ahead of the initial crowd just with a small adjustment in the entrepreneurial mindset.
Skills And Knowledge
What happens when a person is presented with 30 books, 10,000 articles, 1,000 video presentations and a million Google search result? they ask more questions. Too much information is one of the main reasons behind entrepreneurs’ failure to execute. Before you read any further, acknowledge that it will take time to connect the dots. You will know when you reached a good level of startup understanding when you can relate the advice that one expert says to the tips that others in the same domain say, hence connecting the dots.
If by now you still want to quit, you should. Overnight startup success is built over years of struggle, failure, hustle and a turning event. Bryan Johnson founder of Braintree payments built two startups over a period of 10 years, failed miserably in one, did OK in the other but not OK enough to feed his family so he got a sales job, quit it to start Braintree which he sold to Paypal for $800 million 4 years later. Bryan’s overnight success took him about 15 years. What if someone told you: you will be 80% underpaid for 15 years but at the end, you will make $800 million, would you take it?
If acquiring the necessary knowledge and tools is too much work for you, either find your true Why to entrepreneurship or pursue another endeavor. Your true Why may turn out to be just money which is rarely a long-term driver.
In the midst of knowledge and skill acquisition, entrepreneurs tend to rush into execution. The best lessons are indeed learned by doing. The question is in doing what? should you spend months raising funds, building products or teams? it is highly not recommended for many reasons. First, startup success rates are low and even lower for first-time entrepreneurs; rarely will startup founders build a growth startup the first time. Second, resources are limited and exhaustion of such resources can delay future startup ventures if not kill entrepreneurs’ enthusiasm. Third, the way many successful founders had their ideas was through external stimulus that hit a prepared mind. Only with exposure, observation and experience will the mind be prepared.
Passionate entrepreneurs tend to panic, sleep less and think more at this stage. Too many questions, hurdles and limited resources cause exhaustion. Mentored entrepreneurs realize that there is nothing to worry about because there is an answer to every question, a way around every hurdle and plenty of resources for the passionate entrepreneur who cares enough to panic about the future. Many will still quit. For those who don’t, it is a matter of surrounding themselves with the right people, understanding that worry is part of the success equation and that overnight success is few years ahead so time is not running out because they only have to get it right once.
I Facebook message myself all the ideas that come to mind when I am away from my computer. This clears your head and leaves some room for other ideas.
I can’t tell you where I’d be if I hadn’t had a pen on hand to write down my ideas as soon as they came to me. Richard Branson.
First-time entrepreneurs should be looking to maximize knowledge and boost confidence by combining theory with practice through interesting/cool projects. These projects can be as little as a replica of existing successful models or a mini version of the ideas the founders have been thinking about pursuing. By interesting/cool and mini, we refer to “exercise startups” that are meant to expose entrepreneurs to the application side of startup development. Areas such as: how to generate and qualify ideas forth pursuing? how to test and validate ideas? how to build a product? what part of the product to build first? how and who to hire? how to generate revenue? how to plan for scaling? what are some of the tools that can minimize cost and boost performance? etc. This can be an invaluable experience that prepares entrepreneurs to either take the idea to another level or start another venture by avoiding the mistakes they made from the first one and advance a lot faster with the second one.
Many of us are just too eager to start that we consciously or unconsciously assume our responsibilities and execute our first BIG idea by exhausting our resources in hopes to make it big the first time. We get tricked by our own unprepared mind through biases like belief perseverance, confirmation, anchoring and overconfidence. And that’s fine! There will be lessons learned in both cases and if entrepreneurs are surrounded by the right people (team, mentors and investors), they certainly have a shot at making it big the first time. The start small approach above is simply meant to boost confidence and maximize learning fast and under limited low risk resources.
For those who cared enough to reach this stage, they should be well aware of what it takes to build a successful startup. They should be knowledgeable enough and prepared to make a difference in the world.
Four of their biggest entrepreneurship lessons learned are:
You Don’t Need Tons Of Money To Start
Unfortunately for the dreamers, they didn’t give this fact a chance to be learned or sink in. We often get easily distracted by the media and forget that the millions of dollars raised by publicized startups are a result of months if not years of work to reach a point where the startup is prepared for a financing round for market penetration or growth. Furthermore, according to CB Insights, it used to cost $5 million to launch a startup in 2000. It costs less than $5,000 today thanks to open-source software and cloud-based tools. Money is not as big of a challenge anymore. What about time?
You Don’t Need To Quit Your Job To Start
Knowledgeable entrepreneurs learn how smart startup grinding works. They learn how to maximize the value of their limited time by focusing on value adding activities such as doing things that don’t scale to generate revenue early, validate or iterate on the idea fast by avoiding building products no one is willing to pay for, and taking educated steps centered around buyer/user needs. Those are methods, concepts, tools, techniques, tactics and strategies we are exposed to in the following guides.
Unfortunately for the dreamers, their picture of startup development is a team that worked 16 hours a day to build the next billion-dollar company. Unfortunately for them, they didn’t get to understand that in startups, there is no perfect correlation between the number of hours worked and revenue especially at the beginning. This is because you can never make the market fit an unsuitable product. In other words, working countless hours to prove an undesirable product is a waste of time. Introducing a suitable product is a matter of smart grinding and not a mission to prove a product no matter what it takes. Nonetheless, when hard work is combined with smart grinding, results can be achieved sooner but it is a matter of 1 to 3 months difference. Startup founders with financial and personal responsibilities don’t have to quit their jobs just to speed up the process unless they have the resources to back them up.
You Don’t Need An MBA To Become An Entrepreneur
I earned an MBA.
An MBA can teach you how to execute an existing business model but won’t teach you how to search for one. It can teach you how to become a better accountant, economist, decision maker but will not teach you how to turn an idea into a viable and valuable solution that can generate revenue and compete so by then you can use your accounting and economics knowledge to improve the business. An MBA teaches you to write business plans. You don’t need a business plan to build a startup. An MBA teaches you how to communicate, lead and negotiate. Those are valuable skills that can also be learned from building a startup.
You don’t need an MBA to become an entrepreneur.
An Entrepreneur Is
- Smart Risk Taker. Entrepreneurs recognize the importance of risk and initiative to achieve out of the ordinary results but do so with planning, measurement and education. One of my early investors built a 10 million dollars real estate portfolio within 5 years through debt and yet with zero debt. He recognized the importance of leverage (using external funding) for fast expansion. He kept his job as a lawyer, purchased the first property with his personal funds, secured the first property as a collateral for a loan, used the borrowed amount to purchase two more properties which he then used as a collateral to buy more while paying off the first loans from rent earned from the first three properties plus some of his attorney income. He owns over 100 properties today. Although traditional real estate investing is not comparable to startup development, the example is an excellent case that shows smart risk taking by educated entrepreneurs. After all, as Zuckerberg puts it, the biggest risk is not taking any risk.
- Lifelong learner. “If you think the cost of education is expensive, try the cost of ignorance,” Derek Bok said. In entrepreneurship, the cost of ignorance can be as little as wasting a day running a useless experiment and as high as investing millions of dollars building products no one buys. Most entrepreneurs don’t have a PhD or a masters degree. For entrepreneurs, knowledge is more about open mindedness than it is about degrees. The most successful entrepreneurs are not afraid to ask questions, seek answers and recognize the importance of knowledge every step of the way. They are lifelong learners.
- An irrational rational. That is, they make decisions and take actions that a rational person wouldn’t make but these decisions and actions are often backed by rational reasoning and vision. Uber founders are investment bankers with 6 figure salaries. Would a rational person quit such a high paying job to work on a Taxi app? mostly No. Visionaries do.
- Entrepreneurs strongly believe that there is light at the end of the tunnel. And there surely is, for the believers. With some luck, it can take as little as 3 years or as long as 20 years. But there is an end. If the end goal is to build a hundred-million dollar company, sell a million unit, build a global brand, take the company public or sell the company halfway through, it will happen with patience and perseverance. Real entrepreneurs recognize and embrace this fact.
Eager to execute on their big ideas, they proceed.
Building The Next Big Startup
Entrepreneurs who reach this stage are fully committed to turn their ideas into valuable startups. They let every close person around them know of their ventures and plans. They feel much more equipped to make fewer mistakes and better decisions. Despite the acquired knowledge and planning, they are likely to misunderstand users/buyers, build extra undesirable features, make bad hires, and waste some time and money in the meanwhile. And this is all part of the success equation formula.
When things don’t go as planned, they often consider giving up and many do. The believers understand that everything that is happening is building up and will one day turn into an overnight success. For some who get an interesting job offer or is blessed to have a baby in the meanwhile, they also understand that nothing can stop them from building the next big thing and that a new job or baby simply means better time management.
Money, finding a co-founder, generating revenue, finding investors, deciding on a business model, defining the right strategy and needed resources become a rising concern. The believers understand that none of these concerns are big enough to quit. Product can be bootstrapped, co-founder can be easily attracted, revenue can be generated and funding can be easily raised with good products so they clear their heads and focus on building a product people love. How to build such products? The next guides show you just that.
Often times, no matter what we do, the product is just not selling. One of the mistakes first time entrepreneurs make is invest all the resources (time, money, skill, etc.) to build the best product THEY believed was demanded without listening to the buyer. Few months later, they realize no one is buying. It is disappointing and very irritating. I should know. Other entrepreneurs listen less, build more and still succeed. Others listen carefully, build slowly and still fail to sell and grow. Others gain media attention, raise a lot of money and still fail. Others are ignored and rejected but make it.
It all comes down to product, timing and innovation. While timing can be controlled, having the right resources at the right time is rare so luck plays a role. With innovation comes uncertainty. Entrepreneurs are on a mission to innovate while dealing with uncertainty. This all sounds confusing and that’s the point. Nine out of ten startups fail. If it was easy, everyone would have done it and the reward of success would have consequently been a lot less. We don’t want that! We are on a mission to find many ways that don’t work until we find what works (Thomas Edison).
But here’s an insight.
The only variable that will maximize entrepreneurs’ chances of successfully building their first or second startup is by being surrounded with the right people: mentors, other entrepreneurs, passionate team members and potential investors, while keeping an open mind.
Twitter founders received funding for an idea that failed miserably. The founders went back to their investors to hand back the remaining amount. Investors asked to give it another shot with a brand new idea. Their belief and insights helped the founders introduce Twitter to the market.
Few months into your first startup, one of these scenarios will be taking place:
- You learned what it takes to build a startup and consciously decided it isn’t for you.
- Things are not moving smoothly. You have too many questions and after learning what it takes to find the answers, you are getting lazy. It is a confusing time where you debate whether you should let go. You tend to seek reasons to quit.
Tip: Take few days off. This is normal and expected. All you need is a mentor and people who believe in you. In fact, you need a mentor no matter how things are going. Spend some time looking for the right mentor who is willing to give you some time every week or so. The mentor will help you make better decisions and fewer mistakes. He/she will make your job easier and get a lot of weight off your shoulder.
- Results did not meet expectations. Users/buyers are not as interested as they said, product is below average with many design issues and code bugs, marketing efforts are going in vain, co-founder quitting, etc.
Tip: Be open for change, big or small. Refer to the Twitter story above. It can be a little disappointing to make major changes to the product and plan or to lose a co-founder after all the work that was invested since the beginning, but this is exactly how it is meant to go. Expect small and big changes at any time including a complete change of the idea if needed.
- Results are good and the future is brighter. Some customers are buying and people are talking about the product. Things need some improvement but overall, everything is moving in the right direction.
Tip: With your mentor, discuss hiring, funding and growth plan. Stay focused and keep the momentum going.
Finally, for all scenarios, first time entrepreneurs have the tendency to strongly believe that money is the answer to all problems. Funding can help startups scale but has a little effect on venture initiation and validation. That is, from idea to initial traction, the steps taken by founders of venture capital/angel funded and personal funded startups are the same. In other words, startups with half a million dollars in funding will take the same route as those with $5,000 in the bank. It is understandable that some founders look to minimize risk through funding but this is rarely what happens since investors, in the other side, also want to minimize risk and maximize return by investing in startups with traction and revenue which is also a signal that entrepreneurs are very committed to build a successful company.
With fund raising, expect rejections, unfulfilled promises, unfair valuations, mean comments and external last minute events that can change investors’ decisions. Also, expect help, support, connections, recommendations, lifetime friends, and of course, money. Finding the right investor(s) at the right time is a dream come true. If building a successful career as a startup entrepreneur is a 10-year overnight success, finding the right investors is a 1 to 2-year overnight success. It starts with an email, call or meeting in a conference or over coffee followed by a series of periodic updates. Investors invest in people before the business, and for this reason, it is important that they get to know the entrepreneur which takes time unless the startup is growing very fast that it becomes an investment opportunity not to be missed.
First time entrepreneurs have an 18% chance of succeeding (from idea to exit) with their startup ventures whereas those who failed once have a 20% chance of making it the second time. Furthermore, with a successful startup in the books, founders have a 30% chance to build another successful venture (Gompers et al., 2010). In sum, startup founders are more likely to build a successful company if they failed than if they’ve never tried. Don’t be afraid to fail; it’s all part of the startup success formula.
What makes entrepreneurs become better founders?
Building The Next Big Startup 1.1
When things don’t go as expected the first time, lessons are learned and changes are made the second time. Even if things go well, entrepreneurs incorporate their learnings to build a bigger company. What makes entrepreneurs become better founders is, because
- Of their better understanding of the market and the buyers.
- They project their expenses and needed resources more realistically, and
- They build the right team, among others.
Those three reasons are in fact the main reasons behind startup failure according to CB Insights with 42, 29 and 23 percent respectively. In other words, conditioned on entrepreneurs’ commitment to the startup, they are most likely to fail if they build products people are not interested in buying.
Second and third time entrepreneurs recognize and better understand the importance of market need, money and team. If things don’t go well the first time, don’t quit. It may not be written on paper, but you have never been closer to success.
Scaling And The Challenges That Come With It
Building a product people need and are willing to pay for is no longer a problem. Scaling is about reaching more people and not the first customers. With scaling comes challenges. Many are those who failed to take the company to another level despite overcoming the challenges of building a growth startup. At scalability, your focus turns into:
- Validating product-market fit.
- Maximizing customers’ life time value.
- Avoiding disasters: IT breakdown, major bugs and possible system hacks.
- Meeting financial projections.
- Hiring and retaining the best talent.
- Raising enough funds.
- Keeping up with the competition through exceptional customer service, innovation, pricing and marketing.
Keep your eyes on the prize; it’s not over yet. You worked so hard to reach this point: overcame startup fear, spent quality time learning, made a lot of mistakes and failed to reach your goals a few times, you kept going when others quit, you dealt with inexperience, lack of funding and time when others gave up, you were denied funding but still managed to proceed with limited resources, you took risks and today, you are very close to being rewarded for your hustle.
Success is in the eye of the beholder. What is success for you? Here are a few entrepreneurial achievement measures:
- Generate enough return to be independent of corporate employment while controlling your own destiny.
- Have the authority to test and turn your own ideas into successful outcomes.
- Build a national or international brand with a product that makes a difference in people’s lives.
- Build a million/hundred million/billion-dollar company for acquisition or to take it public.
- Feel pride and make those around you proud of your achievements and success.
And the list continues depending on your own objectives.
Overnight success is INEVITABLE. If there is one thing you should keep in mind from this guide, it would be, PERSEVRANCE.
“I am now convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” Steve Jobs
Are you ready to build your INEVITABLE overnight SUCCESS?
What I Suggest You Do Next
1- What’s your motivation? define it, embrace it and believe in it. Then loudly say,
I understand very well it is going to a bumpy ride with ups and downs but I am committed to it because I am certain there is light at the end of the tunnel.
2- To help equip you with a strong startup knowledge foundation, I have prepared a series of guides from just an interest in entrepreneurship to idea generation and all the way to scalability. These guides will help you connect the dots sooner than you think:
3- Read the guides carefully to give enough time for the information to sink in. And finally, prepare and email me your questions. I will make sure everything is clear as you go from one guide to the other on your way to building valuable startups.