By Professor Arun Sangwan, Alliance University School of Business
To be a successful startup takes more than just an idea. The budding entrepreneurs often believe that success is all about the ‘best’ cookies, apparel or carwash. Such myths can wreck your startup at the ideating stage itself. Besides, many myths besiege funding decisions of formal investors. Their decisions are shrouded in mystery. Do they fund ideas? What triggers a favorable decision etc.?
VENTURES AFRICA – Do you think they had it easy? Behind the most exciting and new businesses in Africa are young entrepreneurs like Ashish J. Thakkar of Mara Group, Mike Macharia CEO of Seven Seas Technologies, Rapelang Rabana of Yeigo Communications, Jonathan Liebmann of Propertuity, Magatte Wade of Tiossan, Patrick Ngowi of Helvectic Group, Sim Shagaya of Konga to name a few. Today, their stories stand testimony to the entrepreneurial spirit in a vibrant Africa.
Say you have an idea too and are determined to take the plunge. You finalize the plan. Your hunt for capital begins right away. However at this stage –
One, you have no evidence that your idea will work.
Two, you have no evidence that you are capable of making it work.
So, in effect you are appealing to prospective investors to trust you without a reason to do so. Only the naïve can trust you to paint a masterpiece as you go about mixing colors on the artist’s palette for the first time ever.
In contrast, the formal or ‘sophisticated’ investors seek evidence. Proposals lacking in evidence stand no chance. It simply does not make any business sense when there are hundreds of businesses in far advanced stages, competing for their capital.
Obviously, the worthiest candidates are successful small and medium businesses which have potential to be large, if not global businesses in the foreseeable future. Such startups have already figured out the entire entrepreneurial jigsaw puzzle. All they need is big money to scale up. And, for the investors’ the uncertainty as well as wait till pay-day is significantly reduced.
Further, presenting an evidence of your capabilities (of making the idea work) is more valuable than anything else including the brilliance of your idea. Why? An idea is like a recipe. It is naïve to imagine that anyone who possesses a recipe book can cook, let alone be a master chef or a billionaire restaurateur!
An idea is merely one piece of a giant ‘entrepreneurial’ jigsaw puzzle.
Solving this puzzle demands ingenuity, passion, seeking and acting on opportunities, organizing and coordinating skills, problem solving skills, perseverance, drive and energy, commitment to work and quality etc. These entrepreneurial competencies and personal attributes are vital for a successful implementation of an idea.
These competencies and attributes are rare. These cannot be imitated or readily procured from the market.
As a Professor of entrepreneurship and advisor to startups, I interact with people who are highly passionate about what they do. At times, you can expect excessive enthusiasm, impatience and bravado in such meetings. Communicating in such situations can be challenging. Hence I often carry a Rubik Cube and ask such participants to sort the cube. There are no prizes for guessing who the first to give up are. The key takeaways are –
One, the probability of a startup accomplishing mega success at the first go is no different than that of anyone sorting the Rubik Cube in first attempt.
Two, if you are overly obsessed with the results, entrepreneurship is not for you. The same holds true if for some reason, you have to make do within a timeframe.
Three, even if you are successful in sorting it out once, someone or something in the business environment will mess it up sooner than latter.
An entrepreneur needs knowledge, skills and attitude of an artist who creates a masterpiece, a researcher who wins a Nobel or an athlete who wins an Olympic medal. Trust suave investors to value these competencies and attributes the most. Devoid of these your success at best would be a flash in the pan.
Recently Larry Ellison expressed serious reservations over Apple’s future without Steve Jobs and compared it with its floundering fortunes after it fired Jobs in 1985, in an interview for ‘CBS This Morning’. Why? Clearly, Larry adjudges Steve’s entrepreneurial competencies and personal attributes more critical than everything and everyone else at Apple.
Yet reviewing literature on the topic, attending typical courses or participating in contests would have you believe that the proposal is the clincher. Sure it is, if your startup is hugely successful and simply needs capital to be a large or a global business in foreseeable future.
For the rest, your best bet is presenting evidence that you are a Sim Shagaya, Ashish Thakkar, Rapelang Rabana, or Mike Macharia etc. in the making. Focus on your ‘entrepreneurial journey’ and not merely a snapshot of your startup in the proposal –
- How far have you traveled yet?
Include how you began your entrepreneurial journey. Needless to say, the farther you are, the more persuading is the evidence.
- How did you get here?
Your journey may present a strong or a weak evidence (or lack thereof) of your entrepreneurial competencies and personal attributes. More the adversity you have triumphed over, the more persuading is the evidence.
- Where are you headed?
It conveys how big is the canvas you intend to paint. Whether your claim is credible can be known by the size of canvas you have painted till date.
- How do you plan to reach there?
It is advisable to share the challenges you anticipate in the journey and how do you intend to successfully address each.
My money is on the entrepreneur and not a current snapshot of his or her startup.
My advice to investors is to watch out for evidence of entrepreneurial competencies, over anything else. Going by their track record, it is silly to assume that all large or institutional investors are as wise as you think they are. So, never be disheartened when they turn you down. The world would not have discovered Harry Porter or the Wimpy Kid had JK Rowling or Jeff Kinney respectively not demonstrated conviction in their creations, commitment and perseverance.