The Iliad and the IPO: The case for entrepreneurship-and how Columbia College neglects it

Columbia University senior, Derek Turner, writes about his views on entrepreneurship and why it may just offer benefits that other fields don’t. Read Derek’s article here:

The Eye: The Iliad and the IPO: The case for entrepreneurship-and how Columbia College neglects it

Starting a Business on the Side

I’ve met dozens of people over the years who were working on something ‘on the side.’ As in, they had a full-time job or were full-time students but were thinking about starting a company.*

In the vast majority of cases, the company never comes to pass. There are a few reasons for this. First is that getting a business off the ground is not quick or easy. In many cases, the individual in question has a demanding full-time job that goes well past 9 to 5 (e.g. a lawyer/banker/consultant). They’re often forced to simply recharge during their scarce downtime, leaving little time or energy left over for starting the next big thing.

Second, there’s a structural limit to how much you can get done for a new business while holding down a full-time job or keeping your grades up. Here’s a list of things you can reasonably do on the side as you’re working full-time:

  • 1. Research your idea (e.g. figure out the market, talk to prospective customers about what they would like, see who your competitors are, etc.)
  • 2. Legal incorporation and Trademark protection (if necessary, most companies don’t need a Trademark)
  • 3. Claim a URL and build a website or have it built
  • 4. Get a bank account and credit card (generally have to use personal credit)
  • 5. Initiate a Facebook page, a blog, and a twitter account
  • 6. Develop branding (e.g. getting a logo designed, printing business cards)
  • 7. Talk it up to your network, try to find interested parties as co-founders, staff, investors, advisors
  • 8. Build financial projections and draft a business plan if necessary
  • 9. Personal financial planning (e.g. cut back on expenses, budget for start-up costs, etc.)
  • 10. Mock-up a prototype and presentation for potential investors or customers

If all of this sounds like a lot already, you’re right; getting the above done while holding down a job or carrying a full courseload requires a significant investment of time. Most people really don’t want to spend their spare time and money on running down vendors, building projections, etc. If you do dedicate yourself to getting these things done, it’s a good sign that you’re serious (or you really don’t like your job/classes).

Even with all of the above done, much of the heavy lifting generally requires that you quit your job and devote yourself full-time to the business. The big lifts include:

  • 1. Raising money. Investors typically don’t want to invest in an idea as much as they want to invest in a team. As in, a team that is currently working. If the company founder isn’t willing to bet his or her full-time on the business, then it’s difficult for an investor to believe that the team is going to be successful.
  • 2. Developing the product. For the most part, product development is a full-time endeavor. Even if you’re hiring someone to build the product, managing them to specifications is a task in itself. Sometimes you’ll need to travel to find the right partners, suppliers, etc.
  • 3. Building a team. You can hire vendors without being at it full-time, but it’s hard to get high-quality people to join you when you’re still holding down the day job. It’s tough for a team to come together if the founder is absent most of the time.
  • 4. Getting customers. Customers want commitment too. They want to know that you’ll be there for them. They can smell it if you’re moonlighting, and it’s not something that inspires buy-in.

What I’ve seen in the vast majority of cases is that the individual in question entertains the idea for a business on the side as a way to make the days pass but, perhaps wisely, never takes the step of committing to it fully. The business remains more or less on the drawing board.

This isn’t necessarily a bad thing. Starting a business is not for everyone, and most people would be better served by staying in their current job or getting a new one. The failure rate for new businesses is very high. And people do learn a few lessons from exploring their idea (mainly that starting a business is hard).

If you quit your job or school and put your heart and soul full-time into starting a company, it may succeed or it may not.** But if you never fully commit, the business is almost certain to fall short of its goals (or not exist). Starting a company is a lot like trying to lead a charge to take a hill. If you run up the hill with everything you’ve got, it’s the best chance you’ve got to get others to follow you and reach the top.

If you find yourself working on a business on the side, occasionally ask yourself how serious you are. Are you willing to give it 100% if certain things fall into place? Would you really quit your job and go for it? Knowing how much risk you would or wouldn’t tolerate can help guide your actions moving forward.

*We’re not talking about a side business you can do in addition to your job (e.g.. tutoring, selling things on eBay, etc.) Side businesses are a great way to learn, try things out, and make a bit of money without much risk. And sometimes they lead to great opportunities.

**When a young person asks me about trying to start a company, I generally try to be encouraging. I figure that even if the company doesn’t work out, he or she will learn a ton from the process and be better equipped for the next time. Entrepreneurship is like a lot of other things where you get better at it with experience. It’s a rare founder who hits it out of the park the first time. It’s not a terrible idea to get a stumble out of the way early (while of course trying your best to remain upright).

Businesses Take Time to Build

One of my mentors once said to me, “It takes at least 4 or 5 years to see if a company is going to work. Generally more. If you’re really fast, maybe you can get a sense of where things are going by the end of Year 3.” I’ve come to realize that he was right.

There have been many recent accounts of companies becoming immediate successes, particularly in the Internet arena. But for most businesses, ‘overnight success’ is an outlier. Generally, a company makes progress incrementally, and the overnight success was years in the making. Even for the rare product or software app that does become a rapid hit, it often took the programmers or product developers or designers considerable time to build up the necessary expertise and iterate. In many cases, they might have worked on some earlier product that no one ever heard of, learned from it, and came back to build something great. Rovio was around for six years and underwent layoffs before the ‘instant’ success of Angry Birds, for example.*

Think about what goes into a company.** First, the founders are on the drawing board developing the concept, testing ideas and preparing the offering. Sometimes this takes months in itself. They have to spend a considerable amount of time gathering resources (people, capital, know-how, sourcing, vendors, infrastructure). Then, the company has to land its first customers who kick the tires and make suggestions. Sometimes these initial customers aren’t paying, but are serving as product development partners. The feedback the founders get at each stage can take months to incorporate. A company can set off in one direction, figures out that it’s not the right way to go, and then go in an entirely new direction. Over time, the product or service improves, and the company gets better at executing and delivering. Eventually, the initial customers are happy enough that they tell their friends, and word of mouth slowly spreads.*** Vendors begin assuming you’re going to pay them. The company may even start generating enough revenue so that it can invest in sales and business development, perhaps migrating to multiple locations or new distribution channels.

All of the above typically describes a painstaking, multi-year process. Most businesses require a complex network of relationships to function (e.g., staff, investors, suppliers, vendors, partners, customers), and these relationships take time to build. In many instances, you have to be around for a few years to receive consistent support. And it takes time for staff, and founders, to become effective in their roles.

Experienced entrepreneurs have a number of advantages where pace is concerned. First, they know roughly how long it will take to get something done if they’ve done it before. Second, they can move faster because many of the necessary relationships are already in place (e.g., they can call people they’ve worked with, use the same lawyer/accountant/P.R. firm, draw on earlier investors, reach out to past customers, etc.). Third, they can proceed more decisively because of greater confidence in their judgment, both internally and externally.

Still, if you’re building a new business, you should expect it to take time. As in several years at least. If you’re not prepared to fully invest yourself in the business for 3 -5 years, you might not want to start down the road, particularly if you’re planning on having other people rely upon you. Prepare yourself for the long haul, and maybe you’ll surprise yourself to the upside if it develops faster than you think.

* There’s a story about a woman asking Picasso for a drawing. He drew a quick sketch on a napkin, and said to her, “That will be $5,000.” She exclaimed, “But that only took you one minute!” Picasso replied, “No. It has taken me my whole life to draw that sketch.” The one-minute sketch is generally years in the making.

** Most companies aren’t producing iPhone apps and have a more involved product that requires suppliers and the like.

*** Despite the advent of social media, most things gain traction and spread at a deliberate pace. Even if someone likes your service, it’s generally not going to be a priority for him or her to go around telling his/her friends about it or liking your service on Facebook. Think about your own behavior – When’s the last time you went around telling everyone you know about something you liked, even if you genuinely enjoyed it? People should do this more often. Spread the word about something you like today!