What's the biggest mistake new entrepreneurs make? Focusing on the wrong thing, according to Mark Cuban, Shark Tank shark and owner of the Dallas Mavericks. "The biggest mistake entrepreneurs make when they're first starting out is they think they have to raise money, and that raising money is an accomplishment," he told Sanyin Siang, executive director of the Fuqua/Coach K Center on Leadership and Ethics at Duke University in an informal video at a recent sports conference. "Raising money isn't an accomplishment, it's an obligation," he said.
So what should they focus on instead? If you're familiar with Cuban's views on business success, you can probably guess his answer: sales. "Sales cures all," he said. "There's never been a company that succeeded without sales. It's not about raising money, it's not about the idea. It's about finding customers that you can really create value for and making them happy. And when you have happy customers, they tell other people who become happy customers and that turns into a successful business."
In fact, considering that he's a shark, Cuban's views on raising money are surprisingly negative. "The best equity is sweat equity," he said. "The more you can do without raising money, the further you'll go and the more of your company you'll own."
How venture capital causes confusion.
All of this might seem self-evident if entrepreneurs didn't live in a world that's been skewed by the whole venture capital ecosystem. Venture capital tends to seek out big ideas with perceived potential for world domination rather than solid startups with common sense business models and dependable customer bases. VC partners and investors start from the assumption that the overwhelming majority of businesses they fund will fail, so a solid business that achieves profitability early and then chugs along is not much use to them. They're only interested in the next unicorn.
From that viewpoint, big ideas can trump immediate sales because the most important thing to do after a seed round or A round of funding is to build on that round and create a powerful pitch for the next round, and so on, until finally, perhaps, an acquiring company buys your startup. In that world, it may not matter that much how many customers you actually have or how good you are at sales. Potential matters more than revenues.
In the rest of the world, Cuban is right that bringing in customers and making them happy is the first priority for every entrepreneur because without customers, you have no word of mouth and there are no referrals or positive reviews to prove your value to potential new customers. Even worse, there's no money coming in the door, and without revenues, you can't stay in business for long. It may not be true that sales cures all, but it sure is true that a lack of sales can kill all.
So take Cuban's advice and start with your focus on sales, and on delivering what your customers hope for and more. Once you can do that well, chances are everything else will fall into place.