One of my main focuses these days is advising startups. It’s an activity I’m hugely passionate about and thoroughly enjoy. I’m fortunate enough to work with a group of companies spread across the world, who are all doing amazing things in their respective industries.
As I’ve immersed myself in the startup community, I’ve come across a lot of people out there doing incredible things for startups and the community as a whole – Dave McClure, Chris Sacca, Paul Graham, Kevin Rose, Gary Vaynerchuk, Tim Ferris, and the Seed Camp crew are all doing wonderful things to help young companies. (I recommend following all of them on twitter.)
But on the flip side, I’ve noticed some rather odd trends. Negative trends. Trends that I fundamentally disagree with. I’m a HUGE believer that the startup and early-stage funding processes can be positive processes as opposed to the “American Idol” negativity that most people associate with getting funding. (Don’t even get me started on the Dragon’s Den.) There’s a lot of misinformation about there, some of it very damaging.
Here are the top 5 common myths about startups that I’ve heard recently:
1: Brand isn’t Important
Horseshit. Brand is fundamental. I’ve talked about this time and time again, to anyone who will listen. Startups are notorious for ignoring their brand or just expecting it to develop by itself. It won’t. If anyone tells you that “you don’t need to think about your brand at this stage” punch them in the throat. They’re doing untold damage to your ability to compete in a savagely competitive marketplace.
Remember, brand isn’t just your name and logo. It’s your values, your community, your tone of voice – every single experience by every single user you have. THAT is your brand. Watch it like a hawk, develop it, and give it the effort and energy it deserves.
2: You have to Fail Before you Succeed
Why do people keep saying this? It feels like something only people who have failed repeatedly would say. There’s a HUGE difference between “learn from your mistakes” and “you have to fail before you succeed.” If you don’t learn from your mistakes, you’re bound to repeat them – that’s simple.
Telling people that they have to fail before they succeed is supremely dangerous because it plants a negative seed in the mind of otherwise optimistic entrepreneurs.
Why shouldn’t an entrepreneur swing for the fence during their first at bat? Screw the naysayers, surround yourself with positive, hardworking people, and go be a Kevin Rose.
3: You need Millions of Dollars in Funding to get Started
No, you need it to scale. Every day you read about startups taking tens of millions in venture finance and it plants this false seed of “I need millions to succeed.” in the mind of young entrepreneurs. Do you know what Kevin Rose spent to start Digg? About $2000. Peanuts. It wasn’t until almost a year and a half later that they took their first round of funding and that was only $2.5million.
Some of the most successful seed-stage companies like YCombinator put very little money into a business (around $20,000) initially because you don’t NEED any more than that. The cost of starting/running a small business is exponentially lower than it has ever been.
Besides, do you really want to fork over a large chunk of your company to an investor. No, you don’t. Bootstrap for as long as you can, seek angel funding when you need it and work hard. You’ll do fine.
4: Profit is Everything
“We made 200% profit last quarter, we’re so awesome.” Really? That’s awesome? Because you only made £420 in revenue. Whoopdee doo. Focusing on profit margins and percentages as a young startup is idiotic and not an accurate barometer of the health of your business at this stage.
Instead of obsessing over profit, obsess over acquisition, conversion, retention, referral, and REVENUE, as Dave McClure so accurately preaches. Not profit. Drive your revenue hard, work on keeping your costs really low, and track them as separate metrics.
5: I have to be in the Valley to be Successful
Ok yeah, I thought this was the case when I first moved back to England after almost 10 years in the US. This might have been true even 2 years ago, but it’s just not the case anymore. The UK and EU tech scenes are booming and there have been some huge successes in the last 18 months.
The handicap has always been the lack of good VCs/angels who really understood the web, and who could take a startup from the spare room to the board room. That’s not the case anymore with outstanding events like SeedCamp.
The infrastructure is there, the talent is there, the audience is there. Go out there and crush it. (And email me if you need any help or want to talk angel stuff: ahunter (at) haebc.com).