Startup Fatigue
People in West Michigan are doing startups completely wrong. I’m sure this is relevant elsewhere, but I can only speak for the context in which I live.
The problem with the startup fad is that people like Rick Devos are throwing money at people that have only sold them on an idea and have no history of execution. I’m sure the presenters at 5×5 have a lot of interesting ideas. I’ve heard many good ideas in the past year for business that I would gladly give my money to if they existed. But they don’t, because nobody has been able to execute on the idea. What the startup culture doesn’t understand is that ideas don’t matter. Execution matters.
In his now classic post, Derek Sivers succinctly articulates that ideas are just a multiplier of execution. Or, as Steve Jobs put it, “the problem with that is that there’s just a tremendous amount of craftsmanship in between a great idea and a great product.”
If you want to fund the next great software company, then take an idea—any idea because it doesn’t really matter—and partner with someone that can execute. There are several great software companies in the area that have a history of execution. Pick one and give them enough resources to deliver.
Update: A few people have taken the previous paragraph as me saying “contract” with one of these companies. I don’t mean that at all. I literally mean partner with them. Find a company that’s interested in your idea, give them an equity stake, fund them, and help them find people that can execute in areas that they can’t.
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Next time we get together, I’d enjoy going deeper on these ideas. Here are a few brief thoughts.
5×5 encourages people with ideas to develop them enough to do a short pitch and to share them with a community of people that could help develop, build, market, and fund their idea. It starts a conversation about what ideas are worth trying to execute. It intentionally focuses on the very early stage, inspiring people to become entrepreneurs instead of trying to fund people who have already decided to become entrepreneurs. It serves a useful purpose that is not mutually exclusive from seed, venture, etc funding.
You’re absolutely right that execution is key, but you usually can’t execute a bad idea. You might convince some investors and spend years trying, but you will eventually fail unless you pivot out of your dead end idea before the money runs out. It’s the corollary to the point Sivers and Jobs are making.
The last paragraph will require beers.
Brandon, thought-provoking post…and as Andy indicates, one worthy of discussing over brews sometime (I extend to you an invitation).
As someone who has worked with several local software firms over the past six years, I can tell you than my challenges in launching a couple of west Michigan start-ups has never been due to execution of the product design and development. I’ve worked with many extremely talented software firms and independent contractors and what’s clear to me is that we BUILD great tech in west Michigan. But we struggle to COMMERCIALIZE great tech in west Michigan (at least at the start-up level).
Great as they are, contract software companies rarely help entrepreneurs market their products or services. They rarely help entrepreneurs develop revenue models to help turn a fledgling project into a profitable enterprise. Contract software companies seldom help articulate a vision worthy of securing outside capital (a typical prerequisite for most start-ups). And they don’t typically provide guidance on scaling a business from start-up to going concern.
West Michigan certainly has an abundance of talented software firms…and like you, I’d advise any entrepreneur to partner with one at the outset. But that’s just step 1 in a very long journey. Execution of the product or service is just the beginning. Execution of marketing and sales, business planning, financing, revenue modeling, talent recruitment, etc. make up the lion’s share of the effort.
Take a look at the “Entrepreneur’s Path” chart the Startup Foundation came up with at http://bit.ly/startupfdn-steps.
The first 2 steps are needed in a community but one thing people in West Michigan get confused on is which step we’re really at. We may be starting to do a good job but we (1) celebrate those first few steps as success (winner of an idea, acceptance to a program, etc…) all too much and we (2) get those steps confused with actually doing something – to your point – and rarely taking it further.
What’s even more frustrating is when people actually make it to the “Startup” step but then quickly get out of it because it’s hard or it’s not popular anymore. The breaking point seems to be when they actually need to make money. Money allows for focus – I don’t personally care how a startup gets it – raising venture round, bootstrapping, customer financing, grants, etc… however, for many this means going back to a job. Don’t get me wrong, there’s nothing wrong with doing a new startup while you’re still working somewhere – the difference is how many people don’t continue making progress. They simply got their old job, make very little progress but expect to be celebrated. Much more on this stage at some other point (maybe while everyone is drinking).
As for hiring great software (project) companies to help you execute. I completely disagree with this for web tech startups. Outsourcing your core competency is ridiculous and a waste of money. This has nothing against the great software companies in this area but has everything to do with the startups themselves.
So when are folks grabbing beers?
I will gladly take you both up on the invitations for beer. Who’s buying? :P
Andy: I may have been unfair to 5×5. I’m sure it serves a purpose. My frustration is that all of the startup activity in the area is focused around ideas. My advice is just that people like Devos should focus more on entrepreneurs that can execute if they want to make wise investments.
I disagree with your last point. I think you absolutely can execute on a bad idea. A lot of people have made lots of money executing on bad ideas.
Garrick: I think you’re alluding to this, but it’s worth calling it out: good execution is about more than just writing good software. I can write great software, but I can’t execute on all the other aspects that make a startup successful. Fortunately I work with some people that can.
I’m also not advocating contracting with one of those local companies, but partnering with them. And not in the “work for equity” sense.
Gather together people that can execute on all aspects, create a new company, give them an equity stake, and fund the development. It will certainly be more expensive than throwing small chunks of change at random ideators, but it will look a lot less like gambling and more like smart investing.
Plz extend your umbrella of grace on this; nonexpert here.
What the startup culture doesn’t understand is that ideas don’t matter.
What makes you draw that conclusion? Isn’t the $5,000 extended to help a person start executing? Should the $$$ be given in the form of a gift certificate to one of the software companies you mention? Maybe 5×5 should by 5×5×5. 5 “pitchmen”, 5 “executors” (Garrick, et al), $5,000, one profound marriage at the end of the night.
Find a company that’s interested in your idea, give them an equity stake, fund them, and help them find people that can execute in areas that they can’t.
Do you know of any such partnership examples? (honest question) Let’s say you don’t just own a bag of cash to fund the partnership. Is your idea done for? Isn’t that why 5×5, Momentum, SBTDC exist?
@Garrick, how would you advise “any entrepreneur” to partner w/ one of these companies at the onset? (rather than just the well-funded ones?)
I just seem to get tripped up when “investors” and “entrepreneurs” almost appear to be used interchangeably in this post. Or when advice is to invest heavily in a software firm “at the onset” before validating basic design, and basic demand, bit-by-bit.
For startups, only learning matters !!!
If you execute the wrong plan, you’ll hit the wall !
A good execution works well in companies that already know their business models. But as a startup, you are still looking for the right business model.
In startups, most of their times are spent in validating their hypothesis (problem, solution, market, price, …). The only way to do that is to meet potential customers and learn from them. If the hypothesis were wrong, then pivot. That’s the famous “customer development” from Steven Blank
Eric Ries wrote a lot about that in his blog. He wrote a book too : “The lean startup”
Thierry – that’s good and all but that’s also quickly becoming the new form of procrastination for people in West Michigan. No need to actually build something – you’re doing customer development.
Aaron,
Don’t you think that the cash burning rate would prevent people from procastination ?
From my perspective, seeing cash going out and no cash coming in is very stressful and force me to work very hard
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