Guy Kawasaki was the former Chief Evangelist of Apple. He has helped evangelized the great Macintosh computer and had been an entrepreneur and a venture capitalist himself.
The following list would go through the top-10 mistakes of entrepreneurs he observed over the past 30 years as a technologist.
1. Multiplying big market by 1 percent
Entrepreneurs love to put out a huge market size and say how hard it could be to get 1% of the market.
This top-down approach is flawed and dangerous.
First of all, aiming at getting 1% of a market is not a proper projection to start off. Entrepreneurs should start off base on the amount of resource you have in hand, then perform a logical and feasible projection on the target amount customers to get. Then, you can estimate what kind of market shares you will be getting.
Secondly and paradoxically, no investors want to hear you are going to get only 1% of a market. Venture capitalists are looking a big returns and monopoly if possible, so 1% is not going to appeal them.
2. Scaling too soon
After raising money, entrepreneurs often put their capital into the wrong resources.
Often, they spend many costs hiring too many personnel with functions that do not generate returns for the company at the early stage. The problem of hiring at the wrong time is once you have invested in human capital, you would not ditch them. This is because you know you need to re-hiring the same role in the future. This demands time and money.
Stuck in between, companies would have high overhead and run out of money before scaling.
3. Thinking partnership is important
Many entrepreneurs are obsessed with partnering.
In Guy’s eyes, partnering is simply two companies trying to compensate each other’s weaknesses. And in this case, two plus two only equals to three.
In the world of startups, only sales matter. Focus on sales instead of partnerships.
4. Focusing on pitching instead of prototyping
A good pitch may help you win business plan contest and give a good impression. But realistically, the key is prototyping. This is because prototyping means the ability to deliver.
A team can quickly fix a problematic pitch within a day with the right guide, but no one can fix a problematic prototype within a day.
5. Using too many slides and too small font for presentation
Guy had been to many painful presentations where entrepreneurs pitch using 60 slides with 8 pt font size. If you stuff your slides like this, it means there is too much information to convey.
Here comes the 10-20-30 rule:
10 slides, 20 minutes, 30-point font
Keep your presentation within 10 slides and 20 minutes. This is because the attention span of your audience is short. Keeping your presentation short and precise helps you convey your message clearly.
Using 30-point font means you can only put the right and important text on your slides. In this case, you will not read text off your slides and lose the attention of your audience. Check out Steve Jobs’s slides, they are in 60-point font and with only one word.
6. Doing things serially
Idealistically, people should focus on one task at a time. So we usually do things serially instead of parallelly.
However, realistically entrepreneurs do not have the luxury of doing things serially. Start-up is about speed. You will have to work on selling, recruiting and actual development at the same time.
7. Believing 51% = control
Some founders think owning 51% of the company means they are in control. They believe when it comes to a board meeting, things come down to a vote and 51% wins.
Nothing comes down to a vote according to Guy in a board meeting, ever. Either nobody wants to do it or everyone wants to do it.
The moment you take outside money. You will have moral and financial obligation to your investor. Take it this way, if your investor takes away their investment, what are you going to do?
8. Believing patents = defensibility
Patents, realistically, will not help your company.
There are two compelling reasons to file patents indeed.
- First, if you get acquired someday, the acquiring company will like it. But it does not help you now.
- Second, it will make your parents proud.
The question you have to ask is: If a big company like Microsoft steps all over your patent, what are you going to do? Can you outlitigate Microsoft? Do you have the time and effort to do so?
There is definitely not wrong to file a patent. But it does not give you much protection, at least from a practical standpoint.
Successfully suing a big company for infringing your patent is simply not a viable and fundable business model.
9. Thinking VC can add value
Venture Capitalists are very busy people. They are looking over a dozen of portfolio companies. They can pick up the phone and introduce you to people, but they cannot do heavy liftings.
You are lucky if you get an hour of their time per month. Sadly, the fact is the less successful you are, the less attention and effort you will get. So do not expect they will rescue you if you are in trouble.
10. Hiring in your own image
Company loves to hire people of the same type and skills. This would create weaknesses in your company. When your company is ‘sales-oriented’, your technical weakness would affect your implementation.
Therefore, you should try to hire different people to complement your skills.
If you are an engineer, hire a salesperson. If you are a salesperson, do the vice versa. This helps create a versatile and balanced team.
In a startup, there basically are three different sets of skills needed:
- Building a product
- Selling it
- Collecting money
You always need people for these three skills.
If you are interested in listening to the original talk by Guy Kawasaki:
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