Lately I have been doing a lot of listening to business plans, listening and meeting new people. One of those new people I met was Steve Burrill. He spoke at a recent conference I was at. He touched on a lot of things that will form a series of blog posts. This one is about the nature of business today, and the flow of capital.
Business is being transformed before our very eyes and it means a lot to how you structure your business to meet the changing marketplace. For example, a few of the items he cited; in the old days the margin was built in your product, now you need to look outside of your product to create margin. Even an artist like Lady Gaga makes more money by being Lady Gaga than she does off straight record sales. Businesses can’t just sell products today. They have to create value for the customer.
In the old days, you would develop an idea and take some money from friends and family. Then you’d build your business and need more money. Where would you turn? Old school way-knock on the doors of a Venture Capital firm. New school way, find a super angel or a group of angels to fund your business. VC’s don’t want to reach down and take risk on seed stage companies. But for the firm, there can be a big difference between taking angel money and VC money. They can act very differently, and their perception of exit is also different. For the business today it pays to research the differences.
Another relic of the past is the incubator. Incubators are slow. They actually don’t do to much for the start up and become more of a waste of time. Accelerators are new. They mentor, give resources and advice to the start up and spin them out so that they can begin creating value right away. Accelerators also can help newbies de-risk their business in certain instances. They also can save on fixed costs if they are set up that way.
Your network has always been critically important to your success. Ask any investment banker or lawyer. The best ones are consummate networkers. Those interpersonal relationship clusters matter. Good networkers create value for one another. In the new world though, virtual clusters matter more. Can you reach out through time and space and create value for people using your virtual network? Then the question becomes, how do you care and feed your virtual network? Find the structural holes between virtual networks. The skills are different than a close interpersonal cluster.
There are so many questions that you want to answer when you start a business. It’s overwhelming. However, my advice is to start at some of these basic things that Steve touched on, and then keep your business simple at the start. Narrow your focus and dominate a market segment. Create value and prove your model in that segment. Then start to branch out and build.
The great UCLA basketball coach John Wooden had some great phrases that he used to drill into his teams. My favorite is, “Be quick but don’t hurry”. He coined it in the early 1960’s but it’s perfectly applicable to doing business in our environment today.
tip of the hat to Ace