Many would-be entrepreneurs aim to bring the next great idea to the market, but those dreams rarely come to fruition without the know-how to navigate the entrepreneurial system.
As a former venture capitalist, Warren Packard, now founder and CEO of Thuuz Sports, knows this firsthand. He and his startup team formulated a very intentional strategy to test their idea, acquire funding, and get their mobile app into the hands of sports enthusiasts everywhere.
What gave you the idea for the Thuuz app?
I had a lightbulb moment as I was watching two of my favorite NFL teams in what turned out to be a surprisingly dull game. About one-third of the way in I realized that I was bored. You never know if a game will be thrilling, surprising, upsetting, or dull. I wished there was a service that could tap me on the shoulder and turn my attention to an incredible game. Why not? I brought in a couple of buddies and ultimately we decided this idea had legs, so we quit our day jobs and started working on it full time.
How did you stress test your concept and gain the confidence to move forward?
There are many, many moments of doubt in terms of what you're doing and how you're doing it, that's natural. We took it on faith that sports fans would love it, but we knew we had to build a prototype as quickly as possible. We built a website where users could sign up, get alerts and notifications, and enjoy the Thuuz experience. We began in 2010, setting our sights on March Madness. This was our litmus test and the reaction was tremendous. That gave us the confidence to start working on Thuuz in earnest.
How did you know that your tech process could hold up covering full seasons of many sports?
Once we validated consumer interest we had to validate the technical possibilities of covering more than basketball. We set our sights on the 2010 Men's World Cup. We knew if we could cover this complex event then we could cover any sport. We did it and the technology stood up to the test; we were ready to start talking to partners.
What was the interest level of prospective investors?
When we began to gauge the interest of industry incumbents we got some very good reactions. Our plan to launch full seasons resonated with about 50% of the prospective partners. Of those about 20% were actually interested in doing business with us.
There are startups out there that show merit, yet are unable to attract the attention of investors. Does that mean they should not move forward?
It's easier to start your idea than it is to stop. We didn't start with financing or customer validation, we started with our guts. But we knew that if things failed around March Madness or the World Cup then we really didn't know what we were doing and should question whether or not this thing could scale. We continued to validate each step along the way and by the end of 2010 we knew it was time to validate that we could raise money. This would be another point in time that we would question whether or not the idea had legs. It took us a whole year to gain the confidence to take money from external resources and offer them a great return on their investment.
As a former VC you have access to many funding resources, but most people don't. How can less connected folks break down the barriers?
You're right, I do, and that allowed me to have almost any meeting I wanted with the venture capital community. But it did not lead to getting an investment from them; I still had to communicate the value proposition, just like anyone else.
I had to do what every startup should: start off with friends and family. If you have confidence in what you're doing talk it up, communicate the passion, make the goal small and start raising little piles of five to twenty-thousand dollars from ten to twenty people in your network. Be bold, ask for support. If you don't pay yourself in the beginning and you are as capital efficient as possible, it doesn't take a lot of money to prove your business.
Friends and family aren't necessarily shrewd business people; how does a would-be entrepreneur know what kind of ROI to offer them?
If your business will generate cash in the beginning you can simply do the math and figure it out. In the case of a tech company, where you're investing in a lot of uncertainty, don't offer them any ROI. Ensure them that if the business is successful they will make a lot of money, but don't suggest that they invest in you because they're guaranteed a return. Ask them to see it as a favor that may or may not make them money. For people who do have money, you are asking for a small percentage of their portfolio, let them know that you will do your best to make it profitable for them.
You've sat at the opposite end of the table so you know what prospective partners are looking for. How do they identify it?
Investors look for extraordinarily talented people with creativity, gumption enough to sell, and a track record of success. During your pitch they will derail you. A pitch may be strongly scripted, but VCs know that life is not. They will put you in an uncomfortable situation to see how you react. They want to know that you are agile enough to answer the tough questions and relate it back to the business.
What is one final piece of advice you would offer a new entrepreneur?
The best piece of advice is to embrace uncertainty. A lot of us have jobs coming out of school; things are constant and certain. The moment you become an entrepreneur things become uncertain and you just have to be ready to accept it. You have to have staying power and plow through it.