Startups For First-Time Entrepreneurs
Some types of products and startups are more likely to succeed.<...>
Especially for first-time entrepreneurs.
My article last week about what South African tech needs sparked a lot of attention (with even the slightly more mainstream media picking up on it) as I proposed an alternative perspective for South African entrepreneurs and startups. Two of the things that I proposed specifically influenced what kind of products and startups South Africans should be building:
- Something that can be bootstrapped (at least initially); and
- Solutions for other businesses.
In reflecting about this (and elaborating on the story as I was asked questions by various journalists) in the last week, I realized that this mantra and mindset not only applied to South African tech entrepreneurs, but any first-time [1] entrepreneur or entrepreneur that wanted to build something that had a better-than-average chance of succeeding.
With that in mind, I thought I'd further define the types of products and / or startups that I'd recommend such entrepreneurs work on:
1. Build on Other Stuff and / or Within Ecosystems
A big part of the reason why WooThemes has been so successful has been down to the success of WordPress. As we were building a company, someone else was building the platform (and the ecosystem around it), which created the perfect marketplace for us.
Recently I've seen a similar kind of ecosystem forming around Stripe with many 3rd party, complimentary services coming to the fore. Salesforce has been similarly successful with this by even incentivizing Salesforce-specific hack days.
The benefit to this is that it's easy to identify and categorize your target customer. You also don't have to validate that market, because the success of these underlying platforms have already done that for you. Furthermore, the ecosystem that normally exists around these platforms generally makes it easier to get in touch with your target customers.
What I also love about this approach is that no individual platform are without it's problems or unaddressed feature requests. Both of these become a great signal in figuring out what to build for these users.
Beyond WordPress and Stripe, I'm intrigued by platforms such as Ghost and Gumroad today. It's new, raw and has a lot of potential. Similarly, I'm intrigued that we've not yet seen more 3rd party applications built on top of the likes of Github, Campaign Monitor and Trello. All of these presents an existing platform and ecosystem with potential problems that you could be solving.
(There's also another bonus of going down this route: selling your business to the parent platform, especially if they're venture backed. These types of acquisitions makes a lot of sense if the parent company / platform is looking to grow quickly and you could find yourself with a quick and lucrative exit. Whilst I wouldn't set out to achieve this myself, it's not a bad option that might come knocking on your door in future.)
2. Find Fast-Flowing Streams
Two entrepreneurs each start a business at the same time, but in different industries (or industry segments). The one industry is booming with a lot of innovation and attention, whilst the other is growing slower and far away from mainstream attention.
Based on the same input and quality of execution, which of the two entrepreneurs are more likely to succeed? The former of course, because they're in a faster-flowing stream.
This is what happened to me when I built the first WooThemes product back in 2007. I didn't know it at the time, but by doing that I had jumped into the deep-end of what turned out to be a very fast-flowing stream. Within 13 months I had quit my corporate job, found co-founders, hired our first team members and reached $1m in revenue.
Today there's so many of these fast-flowing streams around:
- If you're building on top of a platform; any platform that is growing fast right now represents a fast-flowing stream.
- Certain market segments like eCommerce and Bitcoin (or at least, cryptocurrencies) will continue to grow with great acceleration. The former especially is a segment that might continue to change shape, but will only get bigger (thus representing more opportunities).
- But then there's also less obvious fast-flowing streams... One I'm particularly fond of is this notion that everyone should learn to code (because software is eating the world). The reality is that we need more programmers, because that's the trajectory our future societies is on right now. So if you're building a solution for programmers right now, your potential audience will only grow in size.
The great thing about fast-flowing streams is that it's almost like compounded interest which starts working for you without you having to do anything in return. It literally requires you to show up with a good product and then just hustling to stay on the wave. (Up and to the right.)
3. App Stores are a Bonus
Any segment with a built-in app store (of any kind) is an attractive proposition and most definitely a bonus.
Apple's App Store is the obvious example in this regard even though it's proven to be a fickle mistress (in how some apps just works and succeeds, whilst millions of other never work out. That said though, having that existing marketplace with existing customers and eye balls, makes selling your goods much easier (compared to starting up on your own island located in your own little corner of the Internet).
So when I think about built-in app stores today, my mind immediately goes to something like Shopify. They have a product (and company) that's flourishing, the kind of customer that likes paying for stuff and they have a fantastic App Store for their users. Solve a problem, build a good product and you'll have initial traction guaranteed.
I also think other marketplaces like the Chrome Web Store (albeit with the challenges of filtering the sheer amount of products on there) are under-utilized and could present great value for the right kind of products.
4. Have the Option of Going Big
I like the notion of working on products that enables you to start small (which helps with bootstrapping) and gives you the option of either staying small or going big. (The only difference between the two is the entrepreneur's personal preference.)
What this means for example is to build a product for your local market first before potentially expanding into global markets with the same product. The reason this works is down to your intimate knowledge of that local market which you can leverage to mature a product / company / team which in turn becomes a competitive advantage in global markets.
Taking that same mindset, you can apply it to ideas that are built on a platform, but are also platform-agnostic. Receiptful is an example of that. Whilst it's only built on top of Stripe right now, I definitely hope to expand it to many other payment processors, eCommerce platforms and POS systems in future.
Starting small isn't the same as thinking small; it's merely a different way of de-risking an idea and business in its early stages. Going down this route also doesn't exclude you from building a really big business if that's what you want to do; it just prioritizes reaching profitability and sustainability in the short-term.
There's probably many other ways to think about new ideas, products and startups. My mind is however completely focused on working on stuff that finds some kind of overlap between most of the above, because I don't enjoy taking risks. As such, I like being clever about the way I manage and mitigate risks within my various pursuits and ventures.
I prefer businesses that can be bootstrapped initially, because the constraints (in time and funding) should create creativity. It also means much greater leverage when you want to have those first discussions with potential investors.
The best way to achieve that is to work on products that has an obvious revenue model that you can implement on Day 1. In profiling the most viable type of customer it becomes a no-brainer that other businesses are much more likely to pay for stuff (compared to consumers).
All of this is to de-risk the things I'm working on; I'm just not a gambler, but if I were, I'd play the games where my (inherit) odds of success and reward was better.
[1] I'd define first-time entrepreneurs as someone who has not yet created a profitable and / or sustainable company. If you've tried stuff that hasn't succeeded yet, then you're probably better off also working on an idea that draws inspiration from the above.