“We don’t have any money so we’re going to have to think”
I lost count (and interest) a long time ago of how many times would-be entrepreneurs moan about the lack of funds available for start-ups. You know what? If you genuinely believe that, you simply shouldn’t be an entrepreneur.
You might think I’m saying this because I have forgotten how blisteringly tough it is at the very beginning of a start-up. Wrong. I’m also not saying it because I think start-up funding grows on trees. It doesn’t. My point is more fundamental. To paraphrase Ernest Rutherford (Kiwi nuclear scientist), “if you don’t have any money, you’re going to have to think.”
Being well-funded as a start-up subtly plants the seeds of a crippling disease: arrogance. I’m not saying that you will be arrogant as an individual, but investors have backed your plan and you will be expected to execute the plan. Put another way, you will try to impose your solution on the market, hence the arrogance (you are assuming the market wants what you have).
Contrast this with the bootstrapped-start-up. If you don’t have access to investor funding, there is only one other place you can go to get money: CUSTOMERS! And that’s the crucial point: if you are well-funded, you are encouraged to assume that you are right; if you are under-funded then you cannot afford to be wrong. You will be forced to find-out (“think”) what it is that you can do for customers that they will actually pay you to do.
Follow the journey of a well-funded start-up. You inflate your cost base with expensive people and fancy trappings. Offices, cars, kit of all shapes and sizes (one thing is for sure – if you have £10m you will definitely spend it!). And by the time you realise you’re original idea wasn’t quite right (which will almost invariably happen) you will be out of funds. Bust. Meanwhile, the bootstrapped entrepreneur will have been forced to recruit the most wonderful of breeds: the pirate. No fancy offices, just a battle-hardened pirate ship. And a boat-load of happy, paying customers. I have seen the first hand, which is why the Jolly Roger stands proudly waving on the mast of HMS ByBox!
Constraints are the cornerstone of creativity. Innovation is the commercial application of creativity. If you have limited funds, you will be forced into being innovative. And innovative companies will always win in the long-run.
What do you think? Does the pirate ship always beat the cruise-liner, or am I at sea with my thinking?
Posted by Stuart Miller on March 26, 2012 | Comments Off