Wednesday, December 31, 2008

Getting support for a start up.

A startup veteran notes: "For the first few years, we were totally in a survival mode. We were very, very lean in terms of money and time. We didn't begin with clearly defined aspirations that in four years we'd achieve X and Y. It was more like, 'Let's do something and see what happens.' We went to the try-a-lot-of-stuff-and-see-what-works school. We had a business plan at the beginning but only because we needed one to get a line of credit. We didn't know much about running a business. We figured to learn what we needed as we went along. We went where the market took us.”

As Abraham Lincoln noted, “Things may come to those who wait, but only the things left by those who hustle.” Start-ups and turnarounds are very similar. You don't have much cash or much time. You have to make good decisions and make things happen quickly. Be prepared to skate fast over thin ice. Be prepared to move forward without the right answers. Concentrate on areas where you’re in control. Don’t worry about things that aren’t in your control. Work to develop an instinctive understanding of your target customers. Everyone in your organization needs to develop a proprietary, emotional relationship with the customer, continually striving to understand and respond to their needs.

To nurture start-ups toward maturity quickly, it helps if they belong to a group of interdependent yet nominally independent companies, all built around a core base of knowledge. Idealab strives to help its member companies, not by showering them with cash, but by leveraging shared creative and technical know-how. "We really don't think of ourselves as venture capital," says founder Bill Gross. "We're creative capital. The money we bring is incidental."

Idealab is a business incubator. Like a traditional VC firm, it provides seed money and takes a minority equity stake in the companies it adopts. Like a think tank, it brainstorms technology applications that could form the basis for new products. And like a parent company, it takes a substantial role in overseeing the operations of its subsidiaries. In a fast moving market, one or two months can be the difference between success or failure. The shared knowledge at Idealab enables a start-up to avoid many mistakes so that it can do in four-and-a-half months what would take another start-up nine months to do. Much of the time saved stems from the fact that Idealab companies don't have to build everything from scratch. Since they share office space and administrative services, startup teams are free to just concentrate on those factors that are uniquely related to their businesses.

Idealab is trying to harness both the power of a big company and the nimbleness of a small one. It aims to add value through shared knowledge and creativity and in that way build better companies. The CEOs of the individual businesses have complete freedom to shape their companies while determining which of Idealab’s suggestions seem most relevant and possible to their situations. Idealab uses its experience to systematize the generation of new business ideas. Among its learnings:

- You need to be incredibly highly focused to succeed.

- Even if you have a wonderful product, if you can't clearly communicate to the customers where the product's benefit is, it's not going to do you any good.

Venture Catalysts such as Artemis Ventures and Guy Kawasaki’s Garage Technology Ventures act as hybrid VC, headhunting and management consulting firms, helping startups in every way imaginable. Incubators can help by removing the need to pay attention to routine issues. "The first few months of a start-up are analogous to the first few nanoseconds in the birth of a star," says Steve Glenn, the founder of PeopleLink, which raised $35 million from GE, AT&T and Goldman Sachs and became a leading provider of online community software. "Whatever happens during that short period will determine your permanent trajectory. So if you're freed up from the administrative stuff, you can focus on aiming that trajectory as high as possible."


Unknown said...

This is very helpful. It's good to know that you don't have to know everything and can learn as you grow.


john cotter said...

No one knows everything, although many people seem to think they do when they've had a little success :)