Four Common Startup Myths Budding Entrepreneurs Keep Falling For
Tara Hunt, serial entrepreneur and cofounder of Buyosphere.com, argues that new entrepreneurs are often dealing with a difficult life: they are not necessarily rewarded for all their efforts and they are not really their own bosses. Hunt highlighted four common myths associated with the launch of new ventures during the Montreal International Startup Festival.
MYTH ONE: IT’S A PIECE OF CAKE
Media tend to put emphasis on very successful entrepreneurship stories, like the fast successes of Facebook, Groupon, and Google. In general, starting companies is not an easy task. If it was so easy, everyone would do it to become the next millionaire. One report suggests that only one in twelve startups wind up successful.
Several would-be entrepreneurs are launching new startups while lacking major competencies. Some are learning fast but others may never get a decent payout for their efforts. Few startups can afford to provide the famous perks, like a soccer table or massage chairs.
“The world of startups is very difficult. It can break your heart, take your soul, and reduce your life expectancy,” explains Hunt.
In general, new entrepreneurs have to work very long hours. They have to face rejection from customers, suppliers, possible angels or employees and sometimes, even their own parents. It’s certainly no piece of cake.
MYTH TWO: YOU ARE YOUR OWN BOSS
Several people launch their startups with the goal of being their own boss. Hunt suggests it is a lie.
“It is impossible to wake up in the morning and do what everything you like while still being in charge of your own destiny,” she affirms. Whether it is a demanding customer, a problematic supplier, or a strategic investor, new entrepreneurs must cope with tasks that they don’t like.
According to her, it is normal to have difficulty sleeping, since entrepreneurs are often thinking every hour about their project and their problems, whether it is how to hire a new star employee, or get some new strategic financing. A new entrepreneur is facing many hurdles and should not underestimate the time for dealing with major problems.
Hunt gave the example of the very successful music company: Pandora. The Internet radio startup in the US had 300 refusals in three years from venture capitalist before raising a Series A round of venture capital.
She proposes some solutions: find a mentor and allies and create a board of directors soon with experts in their domains. Those directors can help the startup to avoid the traps in entrepreneurship.
MYTH THREE: FUNDING EQUALS SUCCESS
Tara Hunt suggests that while getting financing appears to be a sign of success for new entrepreneurs, it can have some negative consequences: “You are just the employee of another person (venture capitalist or angel).”
While accepting new financing, managers are losing some control over their firm, and must often report their actual or future decisions to the financial investors. Furthermore, the workload is bigger since they have to prepare new documents, answers emails and questions from investors.
According to Mrs. Hunt: “Success comes when you find a good product (or service) that answers a business need. Your goal is to find the right product before you are lacking money.”
New entrepreneurs must often use creativity in their business model. She gave the example of Airbnb, now the biggest “chain of hotels” in the world. The firm enables individuals to rent their apartment or house to travelers at an affordable rate. Airbnb does business in 186 countries. The firm had the idea to sell cereals boxes to their customers during the 2008 US presidential race. The limited edition of Obama’s O’s and Cap’n McCain’s were a big success: it enabled the firm to finance their growth until they got funding from a VC.
The venture capitalist did not really like the concept of Airbnb, but that he liked the creativity that the entrepreneurs showed by their financing. The VC firm invested $40 million in the startup, which is now one of the biggest successes in tourism. It is the concept of disruptive innovation: a software firm completely transforming the traditional hotel industry.
Funding can equal success, but the correlation is not guaranteed. You need a solid team and a great product or the money won’t help one bit.
MYTH FOUR: EFFORT EQUALS SUCCESS
While most entrepreneurs work very hard, it doesn’t mean that they will be rewarded at the end. Success does not equal effort; again, it’s a factor, but raw effort cannot make up for an incompetent founder or a weak product.
So why are startups are so popular these days? Hunt offers the suggestion that several people want to embrace the dream of being ambitious and become indepdently wealthy. However, for Tara, in order to pass the real test of whether you can really become a successful entrepreneur, you must be able to return living with their parents if you fail.
The CEO of Beyond the Rack, Yona Shtern, admitted to failing four startups before having a successful one. Now his startup is among the fasters growing e-tailers in North America.
Resiliency is a key word for new entrepreneurs. Don’t buy into the myths.
