If you spend any time reading personal finance advice columns, you understand pretty quickly how repetitive that advice actually is. The trick, however, isn’t understanding the rules. They’re simple. The trick is living the rules. Incorporating them into your life. It’s like dieting. Knowing the right things to eat and actually eating right are two completely different things.
Much of the same is true for starting a business. There are things every entrepreneur should do, but often don’t. Upfront Venture General Partner Mark Suster recently penned a column to this effect titled “How to Decrease the Odds That Your Startup Will Fail”. It’s a great overview of the basic facts any entrepreneur must know. But, much like personal finance or dieting, these basic rules are often overlooked.
Mark writes that entrepreneurs need to have as complete of an understanding as possible of the market they’re about to enter. More specifically, they need to know – really have a complete and total understanding of – the market’s size and structure, the strengths and weaknesses of the incumbent, and the unit economics of their offering.
As he writes on his blog:
If you want to succeed you need to study the competitors. You won’t likely launch into a market with nobody else present. You need to ask yourself honestly how your product or service is going to be significantly better in some way than the competition that exists in the market. You need a wedge. You may be cheaper, you may have more features, you may be easier to use, you may target one under-served demographic (think Bevel by Walker & Co.) or you may just be better at sales & marketing than the competition with an equivalent (or even inferior) product. But not to study what else is happening in a market is wrong.
Why would you consider the competitors in a market AFTER you’ve spent 18 months building product on somebody else’s money and with a team you’ve pried away from their existing jobs. You only have your limited time on this Earth and to find out some competitor disadvantage after years of work is crazy to me. But it is often what happens with first-time entrepreneurs who are spoiled for choice with angel investors willing to fund with little thought or with the plethora of incubators that now exists who need a steady flow of options to hope to have the next big winner so they may not ask all the tough questions. But you should. Why wouldn’t you?
Plan. Think. Study. Test. Validate data. Validate firmly held positions. Know your planned sources of differentiation and adjust as you learn. Read plenty of “what went wrong” eulogies by founders and see what you can learn. But also understand that the lens from which they tell you the answer is both imperfect and has a narrative bias.
Mark concludes, “The right answer might be, ‘we should have hired more people and raised more money, more quickly and either succeeded quickly or found out we were wrong quickly and moved on to the next company.’ But it might also be, ‘We chose the wrong market, we didn’t understand the value drivers, we didn’t do enough planning and we did what we thought was cool but the market didn’t validate that.’”