Startup part 1
There is a notion that “startup” is just a small business and “Entrepreneur” is just a “fancy” name for a small business owner. Small businesses such as grocery stores, restaurants, coffee shops, street food business etc all have owners who start their own business. They work hard and hire people, mostly family members. Some are barely profitable as these small businesses are NOT designed to grow. Their goal is simply to survive and support the family. These people have skills and little capital borrowing from relatives. They are not rich and only survive in the local market. Every country has millions of them. Of course, they can be called “entrepreneur” as they seize opportunities and willing to take risks but their goal is only to feed their family, or create jobs for relatives.
There is a different type of small business but focusing on technology with a goal to GROW big. The vision is to change the market, DISRUPT the market, and destroys the old business and position itself as the key player in the new market. For example, Apple, Microsoft, Yahoo, Google, Skype, Facebook, and Twitter etc. The difference between this type and other small family business is the “Entrepreneurs” want to make a difference in the world. Unlike other small family business, these people are not focus on “feeding a family” or earn a living but rather GROW the company bigger and someday will become publicly traded company on the stock market and generate million or billion dollars.
To do that, these entrepreneurs require capital to fund their business, and they attract investments from venture financial investors or venture capitalists. These Entrepreneurs have ideas, knowledge and skills, and they hire the best skilled people. Their vision is to SEARCH for a NEW and PROFITABLE way to do business. Once they start the business, they focus on GROW quickly, hire more people to capture the market, and they will need more capital to help them to expand into a fully functioning enterprise.
The idea of starting small in high technology area then grow big is a dream of many technical people. Everybody wants to be another Steve Jobs or Bill Gates but few succeed because they DO NOT know how. There are many companies started but most failed because they make a fatal mistake: They acted like big company; they copied business of big company; they spent money like big company, and they gave themselves titles like big company. They did what the business schools teach them. They learned these rules in Business Administration textbooks or in the MBA programs. These are theories based on big company for the industrial age which DO NOT work in the Information age.
Startup is NOT a big company yet but only “TEMPORARY” organization seeking customers and directions. The first common mistake that many Entrepreneurs make is give themselves tittle such as President of company, Chief Executive Officer (CEO) or Chief Operation Officer (COO) or Managers then begin to act like their company is already established. They rent big office, buy equipments, hire secretaries etc. This “ego-trip” means spending the little capital that they borrow from parents or relatives. That is a fatal mistake and why so many run out of needed capital to build company and failed. They DO NOT fail because their ideas. They DO NOT fail because of their technical knowledge. They FAIL because they are too hurrying to act like they already succeed. They FAIL because they run out of money.
Startup is NOT a company yet. It is a TEMPORARY organization of few people. It does NOT have customers yet. It does NOT making money yet. It has not making enough money yet and SHOULD NOT act like a well established company. Startup is only a TEMPORARY group of people SEEKING to find a PROFITABLE business therefore it must follow DIFFERENT RULES, DIFFERENT PROCESS.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
