You don’t need an investor

Venture Capitalist

Yesterday I got an email from Sam Birmingham from Pollenizer, and it’s message was so compelling, I had to share it here:

It is something we hear all too often… “I was wondering if you could help me find an investor?”

You don’t need an investor. You need customers.

You don’t need an investor. You need to prove that you are developing a sustainable business model.

You don’t need an investor. You need to focus on learning as much as you can with the finite resources at your disposal.

Sometimes having limited time / money / people can be an advantage. Do the best you can with what you’ve got. Stop making and start answering the most important question in entrepreneurship – what comes next? 

For more startup goodness be sure to check out the Pollenizer blog. 

New Book – The Great Fragmentation – out now.

The first question early stage startups should ask themselves

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When we being our journey into a new startup we get excited by the possibilities of what we are about to build. Especially when it comes to raising capital to support the project. But in the moment there’s one question we should not forget to ask ourselves:

Is this a technology push or a problem pull?

The answer to this question changes the direction of the entire project. It changes who will care about what we are building. If making money is the objective, it makes more sense to be in the problem pull space. If you want to change the world, Peter Thiel or Peter Diamandis style, then it pays to be in the technology push arena. Both can become commercial success stories, and one isn’t superior to other, it just depends on what we are chasing – it’s really about the ‘Why?’ The thing that really matters is not confusing which of the two our startup plays in and ensuring our expectations match the funding, timeline and outcome realities.

New Book – The Great Fragmentation – out now.

7 simple concepts

Had a few ideas in my mind for blog posts. But thought I’ll just soundbite them now and go deep later:

1. Selling Potatoes: Startup ideas are often far too clever. Often they represent what is technically possible, rather than what is technically needed. I keep coming back to the idea of selling potatoes. That is, selling something demand already exists for. If we do this, we can stop wasting resources trying to creating demand. Instead we can just do a better job connecting and serving the existential market. Buy for price X and sell for X2. I’m wondering why a ‘potato’ business is rarely considered by aspiring entrepreneurs. We ought resist the temptation to 3D print ceramic fur balls for imaginary cats.

2. Market Validation: Real market validation must be with strangers, not colleagues. If it’s an online business, then validation can’t be done in person. If it’s a physical business then validation can’t be done on line. We ought match the real world. Real market validation should involve money, and avoid surveys.

3. Size & Attitude: The bigger the company the harder it is to maintain a cool attitude. When companies go public, their DNA changes. It’s just a fact we ought accept. At this point founders don’t care, they’ve already made bank. When our favourite companies get big it is inevitable we will suffer from a little bit of startup nostalgia.

4. Business Model & Problem Solution: I often get pitched startups that have a great business model with no real human problem. Or a solution to a human problem which struggles to find a business model. Our chances of success increase dramatically when we have both. We should work hard on having both of these elements when conceiving our next startup.

5. Quiet Self Esteem: It is what we are doing when no one is actually looking that matters. The actions we take that only we will ever know about. This is what we should focus on.

6. Half Baked Ideas: These are the best ideas to play with in the short term. It means we are in the kitchen experimenting. It doesn’t mean we should try and sell these cookies at the market, but we should always throw a few new recipes in the oven.

7. What VC’s Really Invest In: Justifiable failure. They don’t aim to fail, but before they invest a dime they know they will get it wrong more than 9 times out of ten. They’ll never admit this, but they are only ever investing in what will sound like a good bet to their partners. So that when it does fail (and it will more than 90% of the time) it is justifiable to those who stumped up the money. Hence, when seeking capital all we need be is justifiably worth the risk.

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The Silk Road Patron

Regular readers of this blog will be aware of the Super Awesome Micro Project. And if you’re not aware I’m about to disclose some of the secret sauce. Mainly because between now and when we launch, it is physically impossible to be copied by anyone. For two reasons – the first is that no one else has Raul, and secondly it took us way more time and money than we would ever have imagined.

In fact, what we are doing has been on line for some time for those who wanted to seek it out – the secret, has been out a while on this Ignite talk I did at a global digital event as linked below:

A Stranger From Romania.

As you can tell from this super fast talk, we are building a world first piece of technology – a technology which at this point has no commercial goal – and no other reason for existing other than awesomeness. A pressure test of what is possible when the connected world aggregate small amounts of money with large amounts of thinking.  To see what we can build using democratised digital factors of production and a teenage genius.

It was made possible by 40 people in Australia, also known as the Super Awesome Micro Project Patrons. Normal everyday people having a crack at creating part of the technology narrative. Our Modern Day Medici. The facilitators of the future.

What is it?

We are buildng a full size car, built entirely from lego, with an engine built from lego, and the engine runs on air. Actually, let me rephrase this. We have already built it. It is done. We have succeeded.

This is where the Silk Road Patron comes in:

We are at the point where we need to transfer the Super Awesome thing and the Super Awesome kid from Romania to Australia for the launch. The cost of transferring our adopted son and our fantastic plastic machine to our fair brown land rounds out to approx. $25K give or take. It is our plan to airfreight both artefacts human and construction – for time & safety reasons. The truth is, I can’t ask any of the patrons to put in any more money than they have already donated. Every single one of these people has already stretched themselves financially. I personally do not even want to talk about how much money I have put into this, other than to say it is 100+ times more than I thought it would be. This is no exageration.  And so what we need is the Silk Road Patron.

The Silk Road Patron is the internet version of a silk road trader of antiquity. Someone who is intrigued by the possibilities of exchange from lands afar. Interested in new minds, methods and techniques. Inspired by and for the benefit of a populous wider than themselves. This Silk Road Patron has nothing to prove to anyone, because they’ve already done it – they’ve crossed the globe, trekked the path and already made bank with their own spice trade. They want to give back – be the final player who connects the possibilities of the #SAMP. The Silk Road Patron is a person, not a corproation. The Silk Road Patron’s gift of participation in this arduous project, is participation itself – a personal satisfaction.

This is something wider and deeper than the #SAMP – it is in fact the search for Australia’s most generous entrepreneur.  A VC whose return on investment does not involve percentages or ROI. Their drive is ROH – return on humanity. (It is worth noting we can provide validation and proof of our achievements via private digital methods.)

And so our search for this person starts today. Please let us know if this person is someone you know, or maybe, just maybe it is you. 

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Reality, Comedy & Venture Capital

The story of the court jester is an important one. Largely employed by rulers to entertain during medieval times, they served not simply to amuse but to criticize their master and their guests. The jesters position was one within a the power structures of society. Rulers knew that their servants had neither the position or the courage to drop a truth bomb or two, and so this role was outsourced to the local fool.

The problem today, is that most leaders, CEO’s and entrepreneurs don’t have a personal jester to keep them in tow. Maybe we should. It’s also fair to say that the technology and Venture Capital realm could do with an injection of reality now and again. I recently happened upon a video of famed inventor Nikola Tesla as if he was transported from the past directly into Silicon Valley. He was pitching his concepts to a group of VC’s whose responses were both hilarious and predictable. Another classic example which proves we often have more to learn from the Court Jester than the local hero who has already made bank. It seems as though we too have our own Jester, in the form of video spoofs.

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End of year lessons

I came across 3 really good pieces in the past week that I really think are worth sharing.

  1. The first of the these was a blog post from Jason Calcanis on the topic of how moderate success is the enemy of breakout success. Something I spoke about earlier this year. But this post is totally insightful and potentially direction changing. While we all espouse staying the course – maybe the course isn’t to stick to a particular idea, but to stick to being in startup land. Instead we should pivot quickly and frequently until we find the right path. His contention being that when we are on the right track, we’ll know within a few short months. Read it here.
  2. The second is two important pieces from Seth Godin. This first is a video where he is very candid about his previous failures, which for me was important because he talks so often about the power of failure and for once we hear more about it – some of his past ventures where pretty out there. It was a great video interview – watch it here. Another post of his stood out to me as his best of the year. It was about confusing being good with being lucky. The post explains itself very clearly – the lesson to take is not to be alarmed if you haven’t been lucky ‘yet’. While others, even revered Silicon Valley wiz kids may well have just been lucky. In fact, some get so lucky we may never find out if they are actually any good. Read it here.
  3. The last is a story about startups by Sriram Krishnan that were told they couldn’t succeed and were ‘Not Fundable‘. What I love about this post is how convincing the negative arguments are. They are indisputable – but you’ll know what happened to these ideas… More proof that anything can happen during a technology revolution. Read it here.

I’d be keen to hear about any links you’ve happened upon which provide some poignant end of year lessons for us to consider over the holidays.

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The truth about crowd funding

Most web tools that are re-shaping commerce are doing one thing, handing over control to the users from the producers. They are democratizing the factors of production so that anyone with access and ideas can now play. They do this through cutting out two things that existed and thrived in the industrial era: middle men and gate keepers. The power of collaboration has been touted as a revolution consistently since the the word web 2.0 exited the mouth of Tim O’Reilly. I think it is entirely justified. This is particularly the case with the latest disruptor to emerge – crowd funding. The reason that funding our projects from the crowd changes everything, is because it doesn’t really change anything.

All things have always been funded by the crowd, we just didn’t know it before.

To bring this idea to life let’s consider a couple of examples:

Debt funding via banks is a form of crowd funding: They take our deposits, assess and carry the risk of ‘sub-letting’ our deposits on margin. Essentially banks make money from crowd funding projects and managing the organisation of it.

Capital raising via VC firms is a form of crowd funding: They take large portions of their venture money from Superannuation or 401K funds which has been allocated to ‘high risk’ investments. This is typically between 1-5% of the total asset allocation. Again, our money is being allocated in our behalf from which transaction profit margin is made.

The point is that pretty much every type of investment that involved aggregated money, has always been the money of the ‘audience’ hidden within a structured system. A system which we are now re-structuring with deomcratised tools so that we can organise our capital amongst ourselves. So that we can access each others funds without permission from financiers. So that we can decide what is worth funding. So that we can make the margin available on float capital. And this is just the start of the inevitable changes to the financial system.

The very truth about crowd funding is that before it arrived in its current ‘web organised’ form – we got locked out of the system that our money funded. And it feels like crowd funding of micro projects is just the begging of something much bigger and more important. The question for aspiring entrepreneurs is how can we disrupt the finance industry further with newly connected commercial eco systems?

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