Primer to get you past the concept stage
Is your idea any good? Here’s how to figure that out
Sean Wise is a Toronto venture investor and Ryerson University business professor who created The Naked Entrepreneur, a TV show to showcase interviews with prominent entrepreneurs. Brad Feld is a tech entrepreneur and investor in Boulder, Colo., whose best-seller, Startup Communities, made him a global expert on building regional hot spots of entrepreneurial activity. When Wise invited Feld to appear on his show, it was almost inevitable the two would find a way to work together.
Their collaboration is a modestly titled book, Startup Opportunities: Know When to Quit Your Day Job. But it could have a massive impact on the way entrepreneurs do their thing.
For years, Feld and Wise have dealt with one common question from prospective entrepreneurs: “Is my business idea any good?” Feld is a prominent early-stage investor (he made a lot of money from Guitar Hero) and has written several startup books; Wise served five years as an advisor to Dragons’ Den, coaching pitchers on how to describe their business ideas in terms that might interest a reluctant Robert Herjavec or a caustic Kevin O’Leary.
It’s not a simple question. But the collaborators dared to think that a book explaining how to validate ideas would help entrepreneurs build stronger businesses and enhance the economy.
The book launched last month with a five-city tour: Winnipeg, Waterloo, Ont., Toronto, Montreal and Ottawa (Western Canada will come later). In addition to holding fireside chats, the authors created a simultaneous Pitch Competition to highlight some of Canada’s promising startups. Four companies pitched at each book-launch event, and said Feld, who’s a co-founder of startup accelerator Techstars, “they were all worth listening to. There was at least one standout company in each city.”
The authors say, five million people a year want to start their own businesses. At one time, they would have been encouraged to write a business plan first. But that requires knowing their business model before they’ve proven it — a cart-before-the-horse assumption in today’s turbocharged world. The latest lean-startup theory, from Silicon Valley-inspired entrepreneurs such as Steve Blank and Eric Ries, encourages entrepreneurs to “launch early, launch-often.” This philosophy posits that startups are not baby businesses, but hypotheses search- ing for a viable revenue model.
Feld and Wise positioned their book as the one you read before you read The Lean Startup, to ensure your idea is worth all the work.
Any business coach will tell you ideas are virtually worthless. It’s how you package the idea, develop a strategy and approach your target markets that determines whether your opportunity is worth pursuing. Startup Opportunities begins by identifying four general criteria that define a great idea: The idea is durable It is not a fad and will last long enough to allow for monetization; The idea is timely The market is ready to buy the solution; The idea is attractive The potential rewards and returns on investment far exceed the foreseeable costs and resources to create the product; The idea adds value It must lead to a product or service that creates or adds value for its buyer or end user.
There’s also a helpful review of “confirmation bias.” That’s when people pursuing a goal collect all the evidence that supports their viewpoint — and ignore contradictory inputs.
Having vetted many Dragons’ Den pitches over the years, I can confirm that “seeing just what you want to see” is a common failing of Canadian entrepreneurs.
As Dave Valliere, a Ryerson entrepreneurship professor notes in the book, overcoming this bias requires a rigorous mindset. “To avoid confirmation bias, spend your time trying to find information that refutes your beliefs instead of more information that supports them.”
Startup Opportunities reviews many of the most recent, bone-jarring concepts for creating success, from the 10x rule (your innovation has to be 10 times faster, stronger or cheaper than any other solution) to Detroit venture capitalist Josh Linkner’s killer question, “Is your product a vitamin or an aspirin?” (A vitamin is a “nice to have.” When you’ve got a headache, an aspirin is a must-have.)
The authors isolated the key disciplines of small-business management and simplified them for the opportunity-evaluation process. So, the reader gets a brief tour of Lean Startup theory, Alexander Osterwalder’s Business Model Canvas, and Marc Andreessen’s concept of product/market fit. They also get painless introductions to financial forecasting, how to determine lifetime customer value, identifying barriers to entry, and scrounging the best distribution channels.
This is an accessible primer for anyone who has to make one key decision — whether or not to start a business — before they get into the infinite complexities of how to run it. “I don’t think we broke any fundamentally new ground,” Feld says. “We just wanted to write about the very beginning of the journey: ‘Is this a good idea?’
“The answer turns out to be a lot broader than yes or no.”