Entrepreneurs: When Less is More
by KG Charles-Harris
There is so much noise these days about how to build companies, especially in the technology industry. Each time building companies is mentioned, venture capital figures prominently, and it seems as if it is impossible to create great companies without VCs.
I live in the greater Silicon Valley and am an entrepreneur who has started several companies, some successful. I started my first company while living in Scandinavia, together with a friend from graduate school and a work-mate of his. After the introduction and decision to start the company, we very quickly got down to starting to architect the product – a phase that I had very little understanding of as I wasn’t particularly interested in computers at that time. As they were defining the features and building the architectural framework, I was largely left on my own and wondered what my role in creating the company was.
The two gentlemen in question were both technologist and computer programmers, and very bright. I, however, was more of a jack-of-all-trades who had studied several subjects, traveled widely and had too many interests. In short, I didn’t know what I wanted to do when I grew up.
All of us had left our jobs and were focusing on our startup – working literally day and night. Or at least they were – I had no idea what I should be doing so I did a lot of coffee making and getting pizza.
Once we had an understanding of what the product would be and had programmed a VERY light prototype, we immediately tried to get projects where we could use the skeleton we had created to garner revenue. The reason for this was not because we understood the Lean Startup methodology, but simply that we were in an area where there was no venture capital available, and especially not for software startups that had no inventory or fixed assets.
It was very difficult to get our first couple of customers and we had to lean heavily on our relationships as they were purchasing something that didn’t exist. We made it, however, and managed to grow the business to around 200 employees before exiting.
The reason I’m telling you this story is because I now reside and work in an area that has hundreds of venture capital funds, angel investors and ecosystems devoted to entrepreneurial activity. Yet, I’m not sure that it’s a good environment for launching a company.
There is a consequence of having access to capital, and that is that there is less of a need to truly align oneself with what the customer actually needs until much later in the process. One can have a good idea, raise capital to execute on the idea and create a viable product without ever having to interact with a real customer willing to pay full price for the product. This leads to misalignment with customers, missed product-market fit and expensive pivots.
This means that a non-trivial amount of the allocated capital is wasted within the startup ecosystem. I’m not sure, but it may actually be good to start a company in a cash constrained environment – though the experience is actually so tough that it defies description.
