There is a reason entrepreneurship is not for everyone. It is hard. That is the same reason 95 percent of startups fail. Beyond the ongoing hustle and grind required to build and scale a new venture, there are some built-in paradoxes that every entrepreneur has to deal with. These situations create a classic chicken-and-egg scenario, and unless you can somehow get out of that cycle of death, there is approximately zero chance of achieving success.

The Investor Paradox

As an entrepreneur looking to raise capital in order to scale the business, the most common response you will hear from investors is "Come back to us when you have traction." Ah, traction, that word.

You leave that meeting frustrated. You need traction--users--to raise capital from the type of investor you want as a partner, but in order to get those users, whether it is through advertising, marketing, or even sales, guess what you need: money.

Simply put, you need money for users and users for money.

This is the most common and most frustrating aspect of getting your startup off the ground.

I wish I had a secret magic trick to solve this chicken-and-egg situation, but there is none. The best solution most entrepreneurs adopt in this situation is pushing off the need to raise capital from strategic investors and instead raising initial capital from family and friends. The terms will be more founder-friendly, and that requirement for traction might be a bit less strict.

So raise some small money from family and friends, and use it to both build a minimum viable product and gain some initial traction, which you can then bring back to the original investor, hoping to raise more money from a more strategic source.

The User Paradox

Once you solve the investor paradox and begin to build your marketing strategy, you quickly realize there is yet another paradox waiting for you around the corner.

Assuming your product has any sort of social element--meaning it depends on people--you have a bit of a pickle.

Let's take a social network as an easy example. If I am user number one on your platform, I quickly realize that it is a ghost town in there and there is nothing for me to stick around for. There are no users, which means there is no value for me.

But hold on a second. If you, the person behind the platform, can't retain user number one because there is no value in being there, how can you possibly expect to bring in user number two? You depend on users for value and in order for there to be value, you need users.

No matter what you are building, if there is a people element, you have to figure out a way to get out of this cycle.

The answer is to minimize the dependency on people until the people are there. 

In other words, try to give me, user number one, some serious value, even if there are no other users. Take, for example, a GPS app that depends on crowd-sourced information. If there are no users, then why would users join? The answer is, even if I am user number one, I will still get some basic turn-by-turn navigation right out of the box. Now, users will join and that information will only get better, which means more users will join.

So, the concept is, before you are able to depend on users (because you don't have any), try to give the first users incentive to both use your product and bring their friends. Then watch the snowball effect in action.

These two paradoxes are built into the journey of any entrepreneur, and it is your responsibility to think out of the box how to overcome them. Once you crack that nut, you can begin the real fun of building a long-term sustainable business.

Published on: Aug 21, 2018