When Launching Your Startup, Consider These 5 Risks

When Launching Your Startup, Consider These 5 Risks

Starting a business has never been more exciting. The startup economy is rich with opportunity, innovation and potential. But at the same time, it is also fraught with high-stakes risks. And while it may be scary to take that leap of faith, jumping into the deep end of the startup pool is significantly less intimidating once you understand and assess these risks.

In my experience as a serial entrepreneur (having sold one company and taking another public), I have found there are five key risks in starting any business. Fortunately, if you are able to identify these risks early on and determine how to approach them, you will up your chance for success.

1. Product risk. Decide what you are selling. It seems like an easy thing to determine — especially for an entrepreneur. But the ability to explain what your product is, the problem(s) it solves, and why it’s worth investing in is much harder than it seems — and it must be your top priority when starting a business. If you can’t do that, you can’t expect people to pay attention, let alone part with their investment dollars.

This is a controllable risk: You need to ensure the product addresses a big enough market, and the right opportunity within that market, at the right time. It is imperative to do the research, know the landscape, and be able to clearly articulate how your business fits within the context of this landscape.

2. Market risk. Knowing your customer and why, how and where they buy related products is arguably the most important risk factor to assess before launching your product. Research this thoroughly. Identifying these routes to market, and whether you can build them effectively, in a timely fashion and within your budget, could easily determine the success of your business. If the market risk falls in your favor and you get into your market early enough, there’s no reason why your business can’t succeed.

3. Financial risk. First-time entrepreneurs are fortunate to have tools such as Kickstarter and Indiegogo that enable crowdfunding to get money in the bank. In addition, friends and family, angel investors and traditional VCs are all fertile sources of this necessary life blood.

Make sure to identify key business milestones and schedules that clearly identify the points in time when equity or debt investments are necessary to reach the next major milestone. If you can articulate your business plan, growth path and reach each milestone successfully, this builds the confidence in your potential investors to write the next check.

4. Team risk. There is no way that one person can vanquish every risk.  That’s why it’s important to have a great team and a personal sounding board — a mentor, confidante or even a startup incubator to help prepare for each challenge. Your team is also great for bouncing around ideas to build a product, bring it to market and maintain successful growth.

Think through your role as an entrepreneur and allow the team to do what it does best. Invest in people who believe in your product and instill a sense of confidence that they can help get your company across the finish line.

5. Execution risk. Many entrepreneurs can become so mired in the details that they completely lose sight of the overall company trajectory and strategy. Alternatively, some company founders remain at a high level and overlook crucial details that result in major problems. What I discovered early on is that a dichotomous approach of assessing the details, at least in the early stages, while maintaining a keen focus on overall business execution, will ensure the highest likelihood of long-term success in building a great company It is essential to strike a balance between being the micro-manager and the 30,000-foot-view strategist.

Some risks you can control, and others you can’t. To be a successful entrepreneur, you need to take counsel from others on how to mitigate risks. But never allow one person to have 100 percent influence in the decision-making process. Participate, evaluate the risks and don’t be afraid to pivot.


When Are You Actually Ready to Launch a Startup?

When Are You Actually Ready to Launch a Startup?

When Are You Actually Ready to Launch a Startup?

How does any entrepreneur know the time is right to start a company? The answer is different for every individual. But when students ask me — and my Babson College students ask me several times a week — I tell them they should invest 10 years of experience before starting companies. It may be possible to get that experience by the time you’re 21, if you’ve spent the previous decade developing a specific product — sandals that you’ve designed — or a key skill — programming applications on a smartphone, for instance.

Otherwise, a young graduate should first identify a field that interests him or her, then work in its leading company for a decade before launching a new venture.

One of my students, for example, wants to import world-leading luxury brands to his home country. I told him to seek employment at one of the world’s leading managers of such brands — Paris-based LVMH would be a good choice.

The reasons for my suggested strategy are simple. First, experience will help young would-be entrepreneurs develop their skills and find out what they are really good at, compared to rivals. Second, it will help them develop a network of potential suppliers, employees, investors and customers.

Finally, it will let them see market opportunities that their employer is not tapping into, opportunities on which they might eventually base a new venture.

The strategy pays off. Here are the stories of two people whose delay in starting companies illustrates the value of getting good at a skill that will be critical to entrepreneurial success.

Micah Adler

Michael Adler is a Finnish-born but American-raised entrepreneur who built success by first getting good at something before launching his company. His latest company, Fiksu — which means “smart” in Finnish — makes a tech platform for programmatic mobile app advertising.

Adler spent a long time getting good at building computer algorithms — the source of Fiksu’s success. He climbed the academic ladder for about a decade before starting his entrepreneurial career. He holds a BS in mathematics from MIT and a Ph.D. in theoretical computer science from the University of California-Berkeley. From there he became a tenured professor at the University of Massachusetts.

What’s unique about Adler is that he quit during the year of his tenure-ensuing sabbatical and started three companies, tapping into his love of algorithms based on theoretical computer science, which to him means “proving an algorithm will work, or providing evidence that it won’t.”

In October 2007, The Washington Post Company bought Adler’s Wakefield, Mass.-based CourseAdvisor, an online lead generator serving the education industry, which he had co-founded in 2004. Adler was president, but says, “My real job was search engine marketing [SEM] algorithm optimization lead.” In March 2012, ADP bought Adler’s next company, Autotegrity, a data analytics concern.

He then founded Fiksu in late 2008. As of August 2014, it had over $100 million in revenue.

Max Levchin

Another example of a successful entrepreneur who first perfected his craft — building operating systems –is Max Levchin. After emigrating to the United States from Ukraine, Levchin entered the University of Illinois-Urbana, where he earned his computer science degree.

Levchin had the urge to quit school and head out to Silicon Valley, but his family would have “murdered him” had he had not earned his bachelor’s degree. Still, he did stray a bit — majoring in computer science instead of the categories math or physics that would have earned his family’s stamp of approval.

After graduation, Levchin trucked out to Palo Alto, where he spent four years — “with a mattress down on the floor in the crappy apartment” of a close friend from college. That friend, Scott Banister, sold his latest company, IronPort, for $1 billion. Levchin started writing code “for fun.” But he says he hated the Web and alternately enjoyed building utilities for the Unix operating system.

With encouragement from Banister, Levchin got the entrepreneurial bug and started his first company in 1994. A large number of the companies he founded failed.

One that he did evolve into a big success was PayPal. Levchin had hired eight or nine people to develop security software for the Palm Pilot — a so-called personal organizer. Through a mutual friend, Luke Nosek, Levchin met Peter Thiel. Levchin recruited two engineers from the University of Illinois, and Thiel recruited Ken Howery from Stanford.

The two formed Confinity to build software for an online payments service that ultimately became eBay’s primary payment mechanism. As they were working on this, another company in the online payments space, X.com, run by the current CEO of Tesla, Elon Musk, was located down the street. X.com approached Confinity and in 2000 the companies agreed on a “50/50 merger” to form PayPal, which eBay acquired for $1.5 billion in 2002.

Separately and distinctly, Adler and Levchin demonstrate the value of waiting until you know what you are doing before you start a company.

The good news is that both started early enough to tap into their ignorance about how much the odds were stacked against them, while they still had the energy and the drive to overcome those challenges.


5 Steps to Launching a New Product in a Week

5 Steps to Launching a New Product in a Week

It doesn’t take long to go from concept to launch when you have a plan.
5 Steps to Launching a New Product in a Week

Have you ever had an idea for a new product or wanted to manufacture your own brand in an existing category? If so, you have probably dreaded the process, from concept to launch. Well, I’m here to tell you that it isn’t as difficult as you might think, as I recently just launched a new brand in under a week.

I’ve consulted with brands in several different industries, and I have always been fascinated with how large you can scale a product that appeals to a worldwide audience. It led me to brainstorm a half-dozen consumer products that I will be launching over the next year. The first product, a teeth whitening kit, is now live, and it only took a week to take it from idea to launch. Here is how I did it.

1. Lock down a ‘MBA’ name.

MBA = memorable, brandable and available.

Your name needs to be memorable and easy to brand, but it also needs to be available — from your website’s domain name to all of the social media platforms you plan to use. I would suggest going with a .com domain name simply because it’s the universal extension. As far as social media goes, you will want to make sure the Facebook, Twitter and Instagram handles are available, at the bare minimum.

2. Interview potential manufacturers.

It’s extremely important that you secure a manufacture that can deliver product on time, making communication the key to this relationship. I interviewed multiple manufacturers and grilled them with very specific questions. If they didn’t fully understand my request or took too long to reply, they were crossed off the list.

Production delays or mishaps due to poor communication can crush your brand before you even get it off the ground. Make sure you are 100 percent confident in your manufacturer before pulling the trigger. Our manufacturer was identified in less than 48 hours.

3. Create your logo, packaging and website.

As soon as the idea to create a new teeth whitening brand entered my mind I had one of my freelance graphic designers working on logo concepts. While he was doing that I was working on the label design and sketching out the framework of our website.

We moved very fast. All of the designs — logo, packaging and website – were finalized in less than three days. Since launching, we have made several website changes and we are on version three of our packaging. It doesn’t have to be 100 percent perfect in the beginning, as you will undoubtedly have several minor changes after you launch.

4. Get your website live immediately.

Get your website up and fully functional ASAP — even if you don’t have your products in stock yet. Why? Because in the beginning, every single visitor and conversion gives you priceless data that you can use to improve the user experience and conversion rate.

There is never a perfect time to launch.

“I’m not going to launch until we receive all of the inventory from the manufacturer.” That’s an excuse.

“We are going to wait until we think the website will convert high.” Another excuse — the only way to know how it’s going to convert and then improve that rate, is by getting real visitors on the website. From there, you will need to test, optimize and then test some more. As soon as your website is coded, flip the switch to “live” and start sending traffic.

5. Establish advertising channels and revenue goals.

You’re not going to want to spread yourself too thin in the beginning. You will most likely have a limited budget, so identify a few solid advertising channels and scale them up before moving onto another traffic source.

For us, we are running targeted Facebook ads mixed in with some influencer marketing. We have an entire AdWords campaign already built out — standard pay-per-click and Google shopping — that we will introduce into the mix next.