Sometimes we forget that starting a business is about selling customers things they need.
You can probably blame the equity-meets-live-action theater of Shark Tank for that. Or maybe it's the stylized chase of the billion-dollar valuation in the Facebook movie The Social Network. You could even throw shade at the satirical silliness of Mike Judge's Silicon Valley -- if you take that show seriously (and you should -- there's more truth in any episode of that show than there is in most business bestsellers).
But despite how Hollywood portrays the road to startup riches, you'd be surprised how many times a wildly successful startup quietly evolves from a small business into a high-growth venture, built on an existing infrastructure by a team that already has a track record of generating revenue.
And you'd be shocked at how much easier that is to pull off. You don't even have to have the existing business to get started.
Back in My Day, Startups Weren't Trendy!
Last week, an entrepreneur submitted a question to me about the "right way" to spin a product out of his existing consulting company, noting that what he was doing seemed counterintuitive to how a startup should start these days.
"It used to be that companies would grow products [internally] -- until startups became trendy. But not all products are born within a startup."
He's got a point. Startups certainly are more trendy than they used to be, but I think his complaint isn't with the trendiness of startups themselves. The problem is the trendiness of how those startups get started.
Earlier I praised the veracity of Silicon Valley, a wicked spin on West Coast high-tech, high-growth startup culture. Furthermore, Judge isn't just skewering Palo Alto and taking thinly veiled jabs at Google or Yahoo! (Hooli), a lot of that stuff happened to me, in Durham, North Carolina, in real time, only to less hilarious effect.
So yeah, I stand by my claim that it's the most accurate look at what that kind of startup life cycle is like.
But that's just one way to start a company. Not the way.
The majority of entrepreneurs and founders I come into contact with are business owners first, entrepreneurs second. They founded their companies not based on who they could reach out to and how much they could raise, but rather investing their own time and money into creating something that generated revenue by selling things that customers needed.
Ditch the Pitch Deck, Unleash the Sales Deck
The answer to that entrepreneur's question comes from one of those Catch-22s you find in the startup world -- specifically, the misguided notion that a fundraising cycle, especially one done at the inception of the company, is a no-cost way to fuel growth. It's certainly much quicker and cheaper than forming a team and building a product and selling into an established market.
But raising money isn't free. You need to spend money to raise money.
And more important, the startups with the best chance of raising money are the ones that don't necessarily need that money to be sustainable or even successful. Another startup Catch-22.
What the owner of the consulting firm maybe didn't realize was that he already had a head start on the path to startup success, compared with those trendy Silicon Valley unicorn wranglers. He has a product, he has access to talent, he has an infrastructure capable of selling and delivering said product, and he has connections to customers, even if only through his existing customers.
I told him not to spend all his time focused on spinning out his product into its own company, and then perfecting a pitch deck for his new company, and then selling pieces of his new company to investors.
Instead, put that energy into a sales deck. Go out and pitch the new product to existing and potential customers or early adopters or whoever might actually want the product you're already building.
- Maybe those customers will fund your idea into reality.
- Maybe you'll sell a few MVPs and get revenue on the books immediately.
- Maybe you'll get a better understanding of how to make the new product investable and worthy of building a new company around.
The more you think about your business as a business and less like a baby unicorn, the better chance your business has of being successful. It doesn't matter if that business starts in a consulting firm, a dorm room, or in a well-known incubator.
If you really want to be successful, all that matters is how many customers need your product and how much they'll pay you for it. Figure that out first, and then take whatever path those answers lead you to.