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The 5 mistakes first-time entrepreneurs usually do & how to avoid them

Serial-entrepreneurs and executives from The Cantillon Institute for Entrepreneurship look at what it takes to be a successful entrepreneur and tell you what should be done if you want to succeed.

Want to take the road to successful entrepreneurship? Take a look at “What” it takes to make it...

Number of ideas and concepts rise from the topic on how to succeed as a first-time entrepreneur. Leading business industry theorists, highly-influential decision-makers and business leaders, top management executives, the media and the public, have all for decades given an extensive definition and outline on how to become successful in the field of entrepreneurship. The truth of the matter is, the majority of the success stories portrayed in the media are one in a few million and in reality, it is not as easy. Many reports show that most startups fail after a year of existence. Do I have the profile to be a successful entrepreneur? Is my product idea disruptive enough? At what time should I launch? How should I expand? All these are questions that can face the first-time entrepreneur.

Executives and board members from The Cantillon Institute for Entrepreneurship are serial-entrepreneurs that mentor these issues. They have decided to address them by writing this article looking at the « 5 Mistakes You Should Avoid »  when starting a business.  They give a list of « What You Should Do Instead» when really wanting to succeed, and conclude by explaining their vision of the « Be king vs Be rich » theory; how to secure a successful launch for your business when being a first-time entrepreneur. A road map to success.

Mistake N°1 : « ENTREPRENEURSHIP MEANS I NEED TO DESIGN THE MOST INNOVATIVE PRODUCT EVER »

The majority of first-time entrepreneurs believe that in order to be successful, they need to design and offer the market a groundbreaking innovative product.

Ex1: Gary is a soon to be graduate from a top business school. He travels a lot and is unhappy to pay commission fees when changing money. What if he could prepay for all that, or better still erase it all? Great idea! No one has done that before. Problems are that he his coming from the energy industry as a global deployment team leader. Nothing to do with retail banking, or forex. Chances of success? nill.

Ex2: Mary Mitchell wants to quit her job as a digital consultant for a Marketing firm. She’s been thinking for a while about what could be the best « innovative idea » to bring in the market. A product or application that could be of use to all, and groundbreaking.

Why is this a mistake?

The reality is that “Nine out of ten startups (…) fail.” Neil Patel, entrepreneurship, marketing and sales contributor, forbes.com. Fortune reported the “top reason” that startups fail is that: “They make products no one wants.” A careful survey of failed startups determined that 42% of them identified the “lack of a market need for their product” as the single biggest reason for their failure. Not to mention those that don’t even make it to the market, which represents many of them.

Instead: « Limit The Risk! »

Instead of trying to pursue an innovative idea for which there is probably no market, limit the risk by controlling or « owning » what you do. Develop a product that you «know» how to build and grow, for a market that already « exists » already. It’s easier, it is less risky, and it requires less investment.

Mistake N°2 : « ENTREPRENEURSHIP MEANS I NEED TO RAISE MONEY »

Next thing first-time entrepreneurs do is having the idea that they need to raise money.

Ex 1: Two years ago, Marc and Thierry met up about partnering to develop an app. They did the business plan and consulted to evaluate the feasibility of launching it. Quickly enough, they came up with the numbers and it showed that they should raise 1,000,000$ in order to design, develop and launch the product.

Question is, raising 1,000,000$ right from scratch can be very risky when being a first-time entrepreneur, as you have no experience starting a business. It is important to note that the vast majority of successful companies are the 2nd, third of fourth try. So why are startups always in the hunt of raising money? Isn’t it often « a waste of time and energy (…) is there a real need for big capital? (…) and aren’t startups budgeting for the wrong things? » Eran Laniado, venturebeat.com.

Why is this a mistake?

Until you have proven how to make money, no one is right mind to give you money.

Want to know what to do instead? Download our 5 mistakes ebook

Mistake N°3 : « ENTREPRENEURSHIP MEANS I NEED TO BUILD MY  PRODUCT FIRST »

 

 

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To be a successful entrepreneur, you must...

All over the schools, media, we are told that if you want to be a successful entrepreneur, you have to raise money. If that is true, Business Angels is your first stop.

Tonight, I will go to INSEAD's business angel's monthly reunion. I know what I will see. I know because I very often go to business angel reunions.
Business angels are individuals, like me, like you, who are successful. Some times, BA are entrepreneurs. Most of the time, they are executives. They want a "piece of the dream"... 

... Or more bluntly, they want to separate from some of their hard earned cash, and buy a lottery ticket that could worth millions. If it's a winning ticket, that is.

I am always baffled by the risk they take, and frankly, by their thought process associated with this level of risk. They have about one chance out of 20 to see any of their money back (most of them don't know that number actually). They give away 5 000 to 10 000 euros each to people they don't know. Of course they do "Due Dilligence" checks before writing that check, but their analysis is flawed at the beginning. 

1 out of 20

Imagine: you have 100 000 euros to spare on top of your long term investments (Fortune 500 portfolio, mortgage payment, your children's plan, your own and your spouse's retirement plan,...).  I know BA who have actually less than this to spare.... and you decide to go into BA investment/lottery, and invest 5 000 euros into 20 startups (most BA don't go that far). You go to pitch sessions, listen to 100's presentations, and select about 20-10% of the candidates for further due diligence process. 

In the heat of the action, you start to dream, big, and take unnecessary risks. At the selection process, I have seen applications with an offering that was already existing on the market and led by former executives of a target industries, or generating revenues, with a fair expected ROI of about 20 to 50%, being.... ruled out. And applicants that had gigantic flaws from the beginning (only technical team, no prior business/industry knowledge, young, no contacts, using buzzwords and cutting edge innovation with potential IP conflict, not experimented or existing on paper only), being accepted for follow up scrutiny. 

So this is where you should be saying that this is what you should do to raise the attention of the investor at this stage: innovative teams have more chances. Raise money ! 

Yes, but there is a catch. 2 actually. 

No experience/sales/traction = no money

The first catch is what happens during the due diligence: being selected does not mean receiving the check. The process's objective is to assess the risks of the investment by gauging the team, its past results, it's technical solidity. The team that conduct this risk analysis is a composed of experts, investors, entrepreneurs, high profiles. I have been instrumental in some of those analysis, we are thorough.

Most of the candidates fail that part. Reasons are that the team never worked together, they are not aligned, they never started a business, the numbers and facts are misrepresented from the pitch, the competition is too established, there is no traction, or no sales. 

To pass this analysis, you must be either a team of rookies that worked together in the past and managed to get results (money is better than users, but hey, that kind of companies is rare anyway in a pitch session), or an experienced team of serial entrepreneurs. In this last situation, a good powerpoint deck is enough because between the time you pitched and the time the du diligence team arrives, you most likely have moved towards a deal. 

That is to say that the pitch part is here to select the people only, on their stage performance. not on the content: bad team, you fail after. You must master the art of the pitch, and go beyond. 

1%

The second catch, is to understand the numbers and your chances. 50 k€ will get you nowhere, so you have to raise more money to start. And nothing attracts money better than money: if you get one check, you are most likely to get some others, probably 5 others. So if you fail at a particular BA round, you most likely won't get another one. The ratio I witnessed is about 15 pitches, 5 due diligence, 1 investment. Given it's a winner takes all kinda situation, 1 successful investment requires beating 75 competitors, that is 1.3% chance of success. 

That is low, but, if you are a first time entrepreneurs, smile, you are part of the 98,7% part of the curve.

What can you do to beat the odds? 

Read on our next post

 

have an idea you need to stress test: we will soon open the sales for our next event. More info here

 

 

  

 

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Mediastart with the Cantillon Institute for Entrepreneurship

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Mediastart with the Cantillon Institute for Entrepreneurship

Paris, March 2018 marked the beginning of the Mediastart entrepreneurship program animated by the Cantillon Institute, and presented by Paris&Co and its partners, l’Agence France-Presse, the Bibliothèque nationale de France, the CELSA and the Institut national de l’audiovisuel.

The Cantillon Institute to accelerate Mediastart entrepreneurship program

Paris&Co and its partners, l’Agence France-Presse, the Bibliothèque nationale de France, the CELSA, the Institut national de l’audiovisuel and The Cantillon Institute for entrepreneurship, are pleased to present the 16 projects that were carefully selected as laureates amongst 58 applicants. These 16 projects constitute the first promotion of this accompaniment program dedicated to project holders and young start-up companies willing to develop an emerging media.

Accelerated by The Cantillon Institute for entrepreneurship, 15 out of 16 of these projects started March 19 at the Cargo. The Mediastart acceleration program proposed by Paris&Co and its partners enables the candidates to understand the entrepreneurial dimension of their project. The program is based on a learning course about the role of the entrepreneur and the experimentation of each media project. It includes two scalable and progressive sessions, each lasting 6-months.

Two phases in the Mediastart entrepreneurship program

The first phase of the program is very intensive and rests on a rigorous methodology that focuses on a “user-centric” approach. At the end of this first phase, these first-time entrepreneurs project-holders having created their company, enter a second phase, based on the consolidation of their startup project, accompanied by Paris&Co, and enriched with specialized training programs and/or job-oriented experts provided by the partners.

Find out who the 12 media projects out of 16 are:

Phase 1:

  • BACK TO AFRICA: Le média des talents responsables.
  • C'EST QUOI TON BOULOT: Le premier média dédié à la compréhension des métiers d’aujourd’hui et de demain.
  • CULT: Premier studio français de production de podcasts dédiés à l'art et au spectacle vivant.
  • DAD: Le média des futurs et des jeunes papas de la génération millenials.
  • FRENCH CONNECTION: Plateforme numérique et chaîne web multi-langues exclusivement dédiée aux cultures, savoir-faire, inspirations et innovations françaises. Un média pour mieux faire connaître la France à l’étranger.
  • LA PART DU COLIBRI: Slow média dédié au journalisme de solution, qui propose des reportages et des enquêtes sur des initiatives constructives.
  • LES MUSES DE PARIS: La radio de l'inspiration continue.
  • MADAM SPORT: Site d'actualité sportive féminine. Madam Sport a été créé pour donner un écho au sport féminin.
  • ONE ARTY MINUTE: Un média pour construire l'histoire de l'art de demain.
  • ONORIENT: Média indépendant qui détecte, diffuse et transporte l’élan créatif de l'Afrique du Nord et du Moyen- Orient.
  • PIERRE PAPIER CISEAUX PRODUCTION: Société de production documentaire en formats innovants pour la génération des 18-35.
  • VINS ET VARIATIONS: De la web-série à l’expérience immersive, chaque mois, au cœur d'un vignoble méconnu.

The Cantillon Institute for entrepreneurship has created a high-level intensive course training, taking individual project-holders or intrapreneurs from “idea” to “client”, and from “client” to a “profitable business-model”. On the basis of an experience in accelerating start-up companies and with a direct link to schools, The Cantillon Institute has developed different acceleration programs enabling first-time entrepreneurs to build and launch their projects. An efficient and proven methodology since its creation in 2014

Have you ever thought of starting the road to entrepreneurship? Discover and register to one of the following Cantillon Institute business creation programs scheduled throughout the year: https://www.thecantillon.com/business-creation-program-for-executives#program4executives-v20172

 

For more information, visit us online at https://www.thecantillon.com/

The Cantillon Institute

+33 (0) 1 84 19 35 75

hello@thecantillon.com

www.thecantillon.com

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What’s the Big Deal about Big Data?

The amount of data in our world has been exploding. 90% of the data has been created less than 2 years ago. This explosion of information is known as “Big Data” and it is completely transforming the world we live in. Analyzing these large data sets will become more and more a competitive advantage and will allow us to unlock new waves of productivity growth and innovation.

 

Leaders in every sector will have to face with the implications of Big Data, not just a few data-oriented managers. The increasing volume and detail of information captured by enterprises, the rise of multimedia, social media, and the Internet of Things will cause exponential growth in data in the foreseeable future.

 

But Big Data is only a piece of the data cake. As of today, the majority of companies do not have Big Data issues, they simply have data they would like to create value out of. As Nate Silver puts it in his excellent book "The Signal and the Noise: Why So Many Predictions Fail—but Some Don’t":

 

"Every day, three times per second, we produce the equivalent of the amount of data that the Library of Congress has in its entire print collection, right? But most of it is like cat videos on YouTube or 13-year-olds exchanging text messages about the next Twilight movie."

 

In order to help companies in this huge challenge, we decided to create Datasama, a modern service that will help them find and hire top-notch Data Scientists. As data experts ourselves, we are the best to know the skills (and therefore the people) required to face these challenges. 

 

You can check out our services here: www.datasama.com

 

We are proud and happy to be guided in our process by The Cantillon. They have created a perfectly suited program which is half a school, half an accelerator. During the first phase (Crucible), you get to learn all the pieces of entrepreneurship in a very intense way (8 days!). The aim of the second phase (Collider) is to get you from the idea to your first customer. It is both ambitious and challenging, that is why it was so appealing to us. During that stage, The Cantillon team and mentors encourage -read force- you to go out and meet people/customers. When you are done, you go meet people/customers again. And again...

 

By going out of your comfort zone, you get direct feedback from people, prospects and soon to be customers. It broadens your horizon but also lets you know what the market pains are and helps you create a tailor-made solution, which might be different from the solution you imagined in your bed. 

 

Overall, it helps you minimize the risk of failure by ensuring product market fit. This, plus the great support from mentors and the other entrepreneurs make the experience a wonderful kick-off for people strongly motivated to fulfill their dreams of becoming entrepreneurs.

 

Cheers to all the members of The Cantillon,

 

The Datasama team

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What French cabbies know that you don’t.

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What French cabbies know that you don’t.

Last night, I was walking down the street in Paris with a friend who was visiting from the States.  We only had 5 minutes to get across town and we hailed a taxi.  In a situation all to familiar to Parisians, a cab stopped, and when the cabbie learned where we were going, he refused to go; his shift was over in 10 minutes, and we were going 5 minutes in the opposite direction.  He would not take us, it would make him late getting home. 

Living in Paris, this seems as inevitable as dog poop in the 16th.  It’s not pleasant, but after  a while you don’t really notice it.  But my friend was shocked.  How could the cab driver not take us?!  It would maximize his earnings for the evening!

At that moment, I realized a truth I had already known; the cabbies do not maximize their earnings—they maximize their time.  This is a genius idea.  Most of us spend  a lot of time trying to increase the output of a system, but little time on making the system more efficient by decreasing the input to the system.

We are all trying to save time,  we have Blackberries, email, and overnight letters.  We pay a lot to save time.  But most of us use money as a proxy for time (not the French), and it’s a terrible proxy.  Time is the limited commodity of life, not money.  French cabbies have figured this out.

Money is not actually valuable

What’s the only thing in life that cannot be truly replaced: time.  So why do we pay attention to how much we earn in cash?

Have you ever lost 100 bucks? I am sure you have, but you probably can’t remember the exact circumstances.  But, I bet you can remember standing in a 40 minute line.  Can you remember exactly how much cash you saved on your last low-cost flight?  I bet, you certainly remember how late the flight was and how long it took with your extra layover.  The lesson is: we can always make more money, but we cannot make more time. 

This is true in business as well as personal life.  I was talking with my business partner earlier today about possibly raising more money before we launch our company.  Neither of us wanted to, not because it would be difficult, but because we didn’t want to loose the time required to raise more money. Raising money takes months, and we want to launch NOW.  

Money is easy, time is hard. 

Maximizing earnings is all the rage in business schools and corporate boards. I  went to a very expensive business school. There, I paid to learn about the time-value of money; or, money made today is more valuable than money made in the future.  The professor illustrated this by telling us about some Nobel prize winner who proved it with a very fancy calculation. 

But I am struck that it’s much more interesting to think about time in the way we think about money.  That is, time today is more valuable than time tomorrow.  If I make a bad decision today that costs me money, I can just make (or raise) more.  But time lost today, cannot be replaced tomorrow.

In school (see Annoying MBA Section), we focused a lot of time learning about how to calculate the net present value of an investment.  In a nutshell, this calculation tells us  how much our future investment is worth today, after we pay back that investment and its associated costs. This allows us to only make investments that make money (if it were only that easy).  And while being profitable is good (another advanced business school concept), it not a long-term advantage—many cash-rich companies go broke.   But knowing how to use time more efficiently, that’s a competitive advantage you can bank on. 

Rather than focusing how much money an investment creates or saves, we should focus on  the amount of time a project creates or saves.  We should only take on projects that create time. 

Because with time you can make money, but money can’t buy you time. Just ask any old rich dude.

ANNOYING MBA  SECTION: NPT is the new black

Net Present Value is very a la mode in business schools right now. NPV is calculated by taking the discounted future value of an investment (a dollar today is worth more to us than a dollar tomorrow), subtracting the initial investment, the cost of the money (ie interest or dividends), and the remainder is the net present value of the investment.  Quite simply: it’s how much the investment made or lost. So, if our investments have a positive NPV (i.e.,  they make money), that is good.  And, if our investments have a negative NPV (they are loose money), that is bad.  Amazing MBA stuff, right?  

Calculating NPV is a little complicated.  We need to know both how much the investment is worth in today’s dollars (discounted cash flow) and how much our money costs (money doesn’t grow on trees you know, we have to pay for investors or the bank for it).  We measure the cost of money as the Weighted Average Cost of Capital, or WACC.  This is how much the money costs us to just have, regardless of what we do with it.  After all, we could put it in a bank and make interest, buy a different stock, or drink more champagne. There is a cost to the money we invest.

While the true cost of capital is interesting (finance folks get really excited by this), I think the more interesting question is: “What’s the true cost of time?” I propose we calculate the Weighted Average Cost of Time; if time is a precious resource, we should know exactly how much it costs when we invest our or someone else’s time (think about that next time you send someone an email). And with WACT, we could calculate the Net Present Time of an investment. 

NPT will allow us to determine whether our investment saves time or destroys time.  Only investments that make time should be undertaken.  We can use this time to create more innovative solutions, more products, more efficient companies.  We can create more value (or if we are French cabbies, we can get home to our kids five minutes earlier) than our competitors.

NPT creates a true competitive advantage.

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The Cantillon experience

Our company is called Dear Muesli, we are an awesome startup that provides the best muesli recipes allowing people to create their own and unique mix. You can check us out here : www.dearmuesli.com

What is amazing about The Cantillon is that the mentors challenge you at all times. They know what they're talking about, and they give tangible examples, out of their own experiences.

The most important thing we have learned during The Crucible (first and most intense phase of the program), is to confront your idea with your targeted customers before going further. For example, the mentors are the ones who motivated us to create an MVP (minimum viable product) to test on the market and to have immediate feed-back. It helped us identify what people like and what they prefer.

The mentors also provide us with great tools to understand our customer better.

  • Meeting with the targeted customers and asking about their pain during the interviews
  • Spending time with the targeted customer and observe their consumption habits
  • Taking notes
  • Submitting a solution to cure their pain

The Cantillon is about validating your hypothesis before creating the product. It saves time and money. It's an extremely time-consuming process but it's also what can decide the fate of your company ! We are wrong until we get it right !

Greeting to all the mentors,

The Muesli Boys

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Introducing Opium Art.

Every week The Cantillon will be introducing one of our entrepreneurs' companies. This week we are welcoming Opium Art. 

Opium Art 

Artists have a lot to offer, but they need help in their communication. That's why we created Opium-Art and our 3D Virtual Art gallery that you may discover in our video.

Our product allows artists to present their artworks in a three dimensional, virtual environment. All they need to know about art is how to share it; we do the rest.

We offer three services : 

  • A virtual gallery: Artists can choose between three standard environments and a virtual exhibition of their artwork
  • Virtual exhibition spaces: Institutions can exhibit their talents. Our solution works for institutions, corporations, and local administration.  We help promote local artists.
  • Many many more: Professional art workers - museums, galleries, and dealers : The possibilities for digital, virtual, and offline interaction are too many to describe, and we are hard at work exploring them all.

While we started before joining, The Cantillon gave us the opportunity
to meet new people and other entrepreneurs.  The creation of Opium-Artand the association with my co-founder happened thanks to TheCantillon crucible process. Creating a startup is a very stressful job because of the unknown future, but being supported by experienced entrepreneurs is extremely helpful

More information is available on our website : http://www.opium-art.com

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Business plan template?


In a serie of blog post, Guy Kawasaki gives template documents for financial forecast, business model and pitching.

To start with, the financial document reconcile vision and details. On one hand the document  support the vision with a non detailed 5 years forecasts. The goal is to check the basic assumptions behind the model. On the other hand, one sheet is dedicated to the next year forecasts in much more details.

http://blog.guykawasaki.com/2012/01/how-to-create-an-enchanting-financial-forecast-officeandguyk.html

Then comes the pitch.

http://blog.guykawasaki.com/2012/01/how-to-create-an-enchanting-pitch-officeandguyk.html

 The business plan will be a full text version of the pitch.

http://blog.guykawasaki.com/2012/01/how-to-create-an-enchanting-business-plan-officeandguyk.html

In my opinion, this last document, unless you want to raise, can be replaced by more agile methods.

The book running lean for instance propose a methodology to iterate very quickly between business model hypothesis for web based ventures.
http://www.amazon.com/Running-Lean-Iterate-Series-ebook/dp/B006UKFFE0

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Some lessons from Bill Gross





Bill Gross is the founder and CEO of Idealab, a technology incubator headquartered in Pasadena, California.  Bill has created over 75 companies since 1996. He shares willingly his experience about creating and running successful organizations. I've collected some of  his ideas mainly from 2 speeches at Le web (video in the post) and at Stanford.
Focus always win — (as long as you choose the right focus). Do one thing extremely well to connect better with the customer.

  • Take risk — risk taking should be encouraged. Idealab favor this as the startup founding teams can go back to the incubator, which acts as a safety net in case of failure.
  • Mar­ket Power Rules — Try to find a rapidly grow­ing mar­ket, it’s like run­ning a race with a strong wind at your back. He illustrates that approach through a brilliant presentation of one of his projects: esolar (listen to the Stanford Podcast). If you have something new or ahead of competition it's too early by definition. In that case, survive until the market is ready.  Don't spend money too fast only to get market shares.
  • Follow your passions — you have to be in love with what you are doing — Every business will face huge chal­lenges that you will only over­come if you have deep pas­sion for the idea.
  • Give equity to unlock human potential — Even the receptionist should have a share.
  • Management teams — Get complementary/opposite skills in your start-up. This is the most important thing to have with a decent idea. Bill Gross learned this lesson through his personal experience. Successful companies among the 300 rounds of financing had balanced team skills. Those which were not successful didn't.
  • Hereafter  is one personality taxonomy among many others: producer, entrepreneur,  administrator, integrator. Everybody is dominant in one category and has weaknesses in the others. 
    • Producer makes things happens, sales to the consumer, all the execution stages to put a product in the hands of the customer.
    • Integrator, the person who is more the "people person". He gives balance to the company. He avoids that people will be at war with each other. He has more interest in what people are thinking than in execution.
    • Administrator. He is a bureaucrat. He puts systems in place. Pays the employees... Sometime the P hates the A because he wants to get things done and the A want to put a system in place.
    • Entrepreneur , gives the vision. Think in the future. Sees things ahead of time.
  •  Master the Demo — Learn­ing how to sell, to pitch, to explain, to demon­strate is one of the most valuable entre­pre­neur­ial skills.
  • Test — Find a way to test your core propo­si­tion as soon as possible. Even without a product.
  • Perseverance  — this is a tough one. You have to persevere but at the same time know when you must let go.

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2000 free videos about entrepreneurship offered by Stanford University

Stanford has developed a large collection of videos and talks about entrepreneurship and innovation. The last post about Instagram was one of them. You can see more than 2000 videos directly on Stanford entrepreneurship web site http://ecorner.stanford.edu/, as podcast on iTune university and even through a dedicated iphone app.

The available topics are:
  • Creativity & Innovation
  • Opportunity Recognition
  • Product Development
  • Marketing & Sales
  • Finance & Venture Capital
  • Leadership & Adversity
  • Team & Culture
  • Globalization
  • Social Entrepreneurship
  • Career & Life Balance
Talks are from famous and less famous people, but most of the time very insightful: Mark Zuckerberg, Larry Page, Guy Kawasaki, Bill Gross...

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Some lessons from the young founders of Instagram


Instagram is a free photo sharing iPhone application. It has grown very quickly in 2010 to more than 10 million users.
In a presentation at Stanford, Instagram cofounders go through several myth according to them  people  believe in before creating their startup for real. Here is a selection:

  1. How to start a company is not explained in a written manual, nor written in a blog :) You have to deal with uncertainty and make snap decisions. This leads you to develop better guts.
  2. They insist on the need to be drawn in and passionate. The fact that you don't want a boss is not a good reason to become entrepreneur.
  3. Don't think about scaling at start.
  4. The hard thing is to find the problem to solve, not to find solutions to problems. They advise to list the major problems you want to solve, then verify this are the problems people are having by putting the product early in front of them. Even if the problem seems simple, simple problems are hard to solve at scale.
  5. Corollary,  don't start a stealth startup. You need to put the product in front of people and explain it. The ideal is to build a minimum viable product, as  advocated in  Ries' book: "the lean startup". You have to find the cheapest way to validate your hypothesis. Failing early and often is good. 
  6. How to deal with competition? They advise to focus on making the product you love and not over- thinking about competition.
  7. Check that co-founders have the same time horizon (cashing out after 6 month vs staying for the long run).

For more, you can listen to the podcast on itune university.
From Stanford to Startup - Kevin Systrom, Mike Krieger (Instagram)

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Business model innovation


During the INSEAD Best of Management at World Knowledge Forum 2011, professor Karan Girotra gave an interesting introduction to "business model innovation". While nearly everyone will think that new technologies are the heart of most innovations, business model innovation is more important than technological innovation in term of generated growth. To give you a taste of this theory, some of the examples he takes to illustrate are:

    • Dell has produced tremendous growth and disrupted the PC industry by creating a new business model: selling customized products before building them. 
    • Better Place, an Israeli start up solved through a business model innovation two problems of current electric cars: the low autonomy and the high acquisition price.
    • Zara achieved the same growth as Apple with "only" an impressive business model innovation.
Later, Karan illustrates that these kind of business model can be transposed from one industry to the other, opening huge perspectives.

Links:

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Interesting Facts About French Eco-System

Some facts about the French eco-system. (click to enlarge)

Startup Genome rates cities as compared to Silicon Valley.  They rank Paris as number 11 world wide.  I am not sure I agree with the assumption that everything should only be compared to the Valley, but it's interesting none the less. 

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FAIL, LEARN, REPEAT

If you aren't failing, you aren't trying hard enough.

I have been working on this for a long time.  I would appreciate any feedback people may have.

Spiral, Invest, Create, and Capture (SICC) Framework

The SICC is a framework for early stage startups.  It is seeks to minimize risk and maximize success.  It is predicated on the notion that there are far more unknowns than knowns in entrepreneurship.

The ICC Chain

At its most fundamental level, to have a successful startup, three criteria must be met:

Invest

Time and or money must be invested 

Create

Something of value must be created

Capture

Sufficient value from that creation must be capture to pay back the investment.

This seems pretty basic (and it is), but it’s generally overlooked.  While many frameworks focus on one or two of these concepts, all three must be met in order to succeed.  For early stage ventures, this is critical.  Unfortunately, there is no way to know how to do that before the launch of the business.  This is especially true in the area of innovation—nowhere is this more true than in startups, where entrepreneurs succeed or fail.

Successful entrepreneurs have to create extraordinary value.  This is well known and documented (in startups, almost no one talks about the invest and capture fundamentals). Value creation is so available because that is what is visibly different when a startup is successful, but that is only part of the story. A startup must survive while it figures out exactly how to create extraordinary value.  Most startups fail because of insufficient capital, they go broke before they complete the ICC loop by either over-investing or under-capturing.

If a startup invests too little, it can’t create enough value to capture. If it creates something cool, but something the customer’s don’t value, then customers won’t pay for it.   If it tries to captures too much value, then customers won’t come or they will leave it after they tried it. Or stated in the negative, if it creates more value than it can capture, it won’t be able to pay its investors and fund it’s operations.  Afterall, creating infinite value is easy with infinite investment (think dot-com bubble).  It’s a balancing act. Invest, Create, and Capture must all be satisfied for the business to succeed.  So, the question remains how much should you invest to create what type of value so that you can pay off your investment?  Tough question.

The short answer is: there is no way to answer before actually making something and selling it to a customer.  

The painful truth is that most products fail—even the products of great companies.  Your products (while I am sure are much better than everyone else's) are also likely to fail—even if they are excellent. The only thing that is certain before a product launch is that the initial product is at best sub-optimal (think MacBook Air) and at worst not remotely viable (think Newton). But this is actually good news.  It allows you to innovate.  Small businesses can innovate much cheaper than large ones, so try a lot of products cheaply until you find success.

The only real way to establish that the Create step of ICC is valuable to the customer, is to sell it to the customer.  If they won’t buy your creation, then you did not create enough real value for them.  It will not work in its current configuration (good thing you didn't loose all your capital figuring that out)! So, make a small investment in an idea and see where you are wrong and where you are right.

Spiraling

Spiraling is the process you use to validate your business idea.   The process is simple, invest the minimum amount to make the smallest product the customer will buy, sell it, and find out how much value you can capture.  Once you do this, you will actually know what your customers want.  Before this, you are just guessing (hopefully with style). 

Once you have gone through this loop the first time, you can add more investment in time or money to create more value and the capture more.  By iterating around this process, you risk the minimum and give yourself the best chance of success.

Minimum Viable Product

The key to Spiraling is to create the Minimum Viable Product, or the MVP.  The MVP is the smallest thing you can make that the customer will buy from you.  You can’t reliably predict what that ideal product would be, so make sure to ask a lot of people if they would buy your idea.  Then make your MVP and sell it.  This is not to say that the MVP is a crappy or bad product; it isn’t. It’s just the minimum product that someone would be willing to purchase. It is different for different businesses (the MVP could be one really nice and expensive ring if you sell to a high-end jeweler, or 1 really crappy ring if you sell to a small costume jewelry store). The important thing is its the easiest thing you can make that someone will buy. Once you sell the first one the customer will tell you what they like, and you can refine it later. 

Here is how to do it

Iteration 1. Ideation

Create an idea for something valuable for someone.  Remember, you are not creating something that is just cool, someone has to want to buy it (if no one wants to buy it, you have a hobby, not  a business). 

Ask yourself, what itch are you scratching?  Your idea needs to solve a problem, it needs to have a customer who has that problem, and you need to have a rough idea about how much it costs per item (10€ or 10 million).  Remember, you will need to sell it for more than it cost you to make it.

invest

Come up with a product idea using any brainstorming method you want. Identify possible customers, how much it costs you to make the item or service, and how much you think it should cost.

create

Make a prototype (could be a screen shot, could be a paper cutout, could be anything, that actually shows the product.  The faster it is to make, the better) 

capture

Ask a dozen people what they think.  

Ask three potential customers if they will buy it if you make it.  Ask them what they like about it.  Ask them what they hate about it. Ask them to order it in advance (they won’t, but it will give you a better idea if they would buy it if you had it!). 

Iteration 2. MVP

Based on the feedback from the ideation, now you want to actually create something to sell.  Remember, the goal is not to be perfect, the goal is to be sellable.  In this stage someone must by the product for you to move on.

invest

Find the minimum amount of money to create the MVP (friends/family/early stage investors).  

create 

Create the MVP based on feedback from Ideation.  Don’t worry about how you are going to sell a million of them.  You won’t.  Worry about how to sell one, and then another.

capture

Sell the product.  If you can’t sell it, make a new MVP—you are barking up the wrong tree. 

Iteration 3. Launch (iterate frequently)

Once you have sold a MVP, sell more.  Make them better. Keep growing until you can’t evolve the MVP without significant investment. Then make a plan for the real product launch. 

Invest

Reinvest your earnings—you are cash flow positive after all. Or, reinvest your earnings and find an angel investor

create

Make your product better based on the information given to you by your customers

capture

Raise prices and pay your suppliers less. If you don't know how to do this, get an MBA.  Enjoy a fat paycheck.

Iteration 4. Exit (a real strategy)

While this may look like a joke, it’s not.  Most entrepreneurs make the most money selling the company.  Big things (even if they suck) sell for more than small profitable ones.  This is the high-stakes game played by the VCs.  Go big or go home.  If this doesn’t appeal to you, go back to Iteration 3 and get PE investors or grow through profits.  Remember, M&A always destroys value from the acquiring company and creates value for the purchased company.  This means you will always be paid too much for your business.  It's a great savings plan, but it almost always destroys your company.  It's a sexy game, but you have been warned.

inves

Raise VC money

create

Lower prices to below cost and grow like crazy

capture

Sell your large struggling company for a huge multiple to offset operational losses.  Retire and become a VC (iterate as a VC).

Conclusion

By using a spiral approach to growing a business, the risks of the unknown are greatly reduced.  The minimum investment is used at each stage when uncertainty is high.  This allows the largest investments the best chance of succeeding.  You make small , baby steps, until you know enough to be bold.  When viewed through the lens of time, it looks like you knew what you were doing all along.  Don't worry, I won't tell.

 

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