Month 2 – Being Comfortable with Rejection
Business strategy, you either love it or hate it! For an entrepreneur it tends to be something you’re told you have to do before you can get started, while in the corporate world strategic planning is seen as the pointy end of management.
We have all heard the stories of a good team securing angel investment based on their idea and elevator pitch. However, I found that since the GFC and the bursting of the dot-com bubble, the reality is Australian investors are risk adverse and capital is scarce. It seems to me only the very best start-ups are able to raise seed capital based on their idea alone. The days of an entrepreneur spending years burning through someone else’s money while figuring out their strategy and revenue model are long gone.
Spending the last two months doing market research and completing the business plan, it was now time to shop our idea around town. Excited, we ran around Sydney spruiking the merits of goParcel: “a simple and convenient website to book and pay for local parcel deliveries based on our mobile application”.
I don’t regret the time spent on goParcel’s business plan and strategy, as I now understand my industry, competition and opportunity well. However a concise business blueprint like the one page business model The Lean Canvas would have sufficed for what was to come.
This road show didn’t end with a swap of equity for cash and the closing of our seed round. Instead there were two common themes; “great idea but let’s talk when you have some traction” and “you have a very clever business model, now seeking an application”.
I later came across a VC funding article highlighting that start-ups generally fail not because they can’t build the product they set out to build (technical risk), but because they waste a lot of money and time building, marketing and selling the wrong product before realising who the actual customer is and the real problem that needs to be solved. Put simply, investors run out of patience and then the start-up runs out of money.
As part of this journey, I am continuingly learning and now realise that the start-up odds of success suggest we are more likely to fail than succeed. It is hard to convince an angel investor to give you a significant amount of money and then wait patiently for 18 months to find out if you have built, marketed and found customers willing to pay for your product or service.
I strongly recommend anyone starting out to read the book, The Lean Startup by Eric Ries. This book brings the principles of Lean Manufacturing to the start-up scene. It is about how one can innovate and learn quickly in order to waste less money and time creating the wrong product or service. One week reading this book will save you months, if not years in product development.
Failing to raise upfront financing for goParcel, we have adopted parts of Ries’ principles by shortening the original nine month product development cycle to three months. We will now offer a scaled down version of our original product (Minimum Viable Product, MVP) and bring our service to market within a third of the time.
It is expected that the benefits from this approach will be that we validate the idea earlier, gain traction and garner real customer feedback. It is hoped that this approach will allow for customer driven product development and in turn create a highly investable team, product and business.
This implementation method is better aligned to our shoestring budget and more exciting from an entrepreneurial perspective. The Lean Startup approach is still a management strategy, just an adaptive approach that reflects the many unknown variables and assumptions start-ups are required to make. From a personal perspective it is exciting to know that we will be in the market within three months and providing a product and service to our customers so quickly.
My experiences over the last 30 days have only reiterated what I learnt last month; it’s hard to be an entrepreneur, don’t rush in, seek advice and do your research. To this previous statement I would add; think lots but do not build an over engineered product, business plan or procrastinate the launch. As for goParcel it is time to quickly prove that there is a market and customer willing to pay for our service. I now know their isn’t an investor who is willing to pay me to find this out.
- If your start-up is destined to fail, do it in the quickest possible time.
- As an entrepreneur you need to be adaptive and learn from rejection.
- The lack of financing isn’t a hindrance; – from another perspective, it is an opportunity.
Continue to follow the trials and tribulations of the goParcel entrepreneurs every month at Shoestring Startup. Discover where they found a wealth of free start-up knowledge as they discuss networking, mentors and advisory boards.