silicon philly 7 founder tips
TRANSCRIPT
7TIPSFORFOUNDERS
BrendanOHaraTech/Business
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KatKlasnicBusiness/Tech
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7TIPSFORFOUNDERS
TIP#1
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Ifyourideaisanygood…
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…it’sprobablynotoriginal
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Don’tthinkitis
Seriously…
Allofyou.
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Soifitisn'toriginal
Stopworryingaboutpeoplestealingit
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Ifyouridea’sthatgood,it’sprobablynotthatrare.Ihatetobetheonetopointitout,butprotectingyourideaingeneralisafool’serrand — goodexecutionishardtofind,but
goodideasarecheap. —
— Anil Dash
Thismindsetisstillcommonamongmanyearlystagefounders
Myideaiswhollyoriginalandbyitself
hastremendousvalue.
Butitdoesn't
Iliketheconfidencethisexudesbutitoftenleadstofoundersspendingtoomuchoftheirmentalenergyonprotectingtheir“idea”.
Thisisenergythatneedstobefocusedonexecutionandbuildingateamofco-founderswhocanexecute
Otherwise
Itwillmakeitseemlikeyouovervalue
ideasandundervalueexecution
Nooneinvestsingoodideas
Theyinvestinpeople
Whocanexecute
Don’tworryaboutpeoplestealingyourideas.Ifyourideasareanygood,you’llhavetoramthemdown
people’sthroats.
— Howard Aiken
TIP#2
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Don’taskpeopletosignanNDA
IfyouthinkyouneedanNDAbecauseyourideaissogoodthatanyonecandoit
Thenyoushouldassumethat
someonealreadyhas
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EveryAngelorVentureCapitalisthasbeenaskedtosignanNDAbyanentrepreneur
whoeventuallytellsthemanywayaftertheyrefusetosignit.
Ifthathappensandyougetthechancetopitchyouramazingideaforabusiness
Makesurethatitdoesn’talready
exist.
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Thishappensmorethanyouwouldbelieve.
TIP#3
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Youneedtoobjectivelyevaluate
your“idea”
Todetermineifitisanopportunity
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Beforeyoustart
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Andasyougrow
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Ifthereisn'tagroupofpeoplewhowillbuyit
AMarket
Thennoonewillinvestinit
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TIP#4
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Havinganideaisn’tthesameashavingastartup
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Andyourstartupisn’tyourbaby.
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Youneedtoobjectivelyevaluate
your“idea”
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NooneisgoingtoevaluatetheROIontheirbaby
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Doacostcalculationtodeterminewhethertofeeditorburpit.
Soifyouidentifytoomuchwithyourideaorstartup…
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…youpreventyourselffromdoingthis
incrediblyimportantactivity.
Youneedtoobjectivelyevaluate
your“idea”
Objectivityisthehardpart!
Weknowwecannotrelysolelyonourintuitionindecidingtogoforward
withastartup
Evaluate,validateandtestallhypotheses
aboutourideaandthebusinessopportunitywe
wanttobuild
Thisisaminefieldofbiasesandlogicalfallaciesthatweneedtoavoidorattempttomitigate.
TIP#5
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Mitigateyourbiases
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ConfirmationBias
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Basicallysomeoneonlybelievingorseekingout
informationthatconfirmsorreaffirmswhattheyalreadybelieveorwanttobelieve.
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Thisseesusundervaluefactsthatsayweare
wrongandovervaluefactsthatsayweareright.
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Youseeitfrequentlyinthenewssources
peopletrustbasedontheirpoliticalleanings.
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Itisalmostimpossibletoavoidconfirmationbiassoweneedtomitigateitinstead.
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Youneedtolistentodissentingopinions
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Reallylisten
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Thefirstprincipleisthatyoumustnotfool
yourselfandyouaretheeasiestpersontofool.
— Richard Feynman
Whatareyoulisteningfor?
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Weknowweneedtoknow
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Whatweknowwedon’tknow
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Butwealsoneedtoknow
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Whatwedon’tknowwedon’t
know…
TIP#6
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CalculateyourOpportunityCosts
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OpportunityCost:thelossofpotentialgainfromotheralternativeswhenonealternativeis
chosen.
OpportunityCost:NumberofPartners*
AverageSalary*Time
OpportunityCost:Let’sassumeyouand2
partnersaregoingtoneedworkwithoutpayforaminimumof12months.
OpportunityCost:Pluseachwillinvest$25,000ofyourown
moneytocoverbusinessexpenses
OpportunityCost:Beforeyourstartupeitherisbreakingevenorhas
enoughtractiontowarrantinvestment.
OpportunityCost:Nowlet’ssaytheaveragesalaryofyouandyourpartnersis$120,000per
yearor$10,000permonth.
OpportunityCost:NumberofPartners(3)*AverageSalary($10K)*
Time(12)
Sotheopportunitycostofyouandyourpartners
doingthisstartupis$360,000plusthe
$75,000youinvested.
Sothiswouldseemtosaythatifyoucansomehowaccuratelyprojectthatthevalueofyourstartupafter12monthswillbeover$435,000thenthisseemslikeitisaworthwhileendeavor.
Nowlet’ssaywethinkthereisan75%chanceoffailure(totalloss)anda25%chance
thecompanyisworth$2,000,000afterthe12
months.
Thatisanaveragereturnof$500,000againstthecostof
$435,000.
Thatisapositivenumberbutalotofriskfor$65K.Hereisthecalculation:
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Butwhatifyouknewthe75%oftimesit
wasgoingtofailafter4monthsinsteadof12
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Thatwouldstillbeanaveragereturnof$500,000but
againstamuchloweraveragecostof$217,500=($435,000*.25)+($145,000*.75).
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Thatisobviouslyabetterpotentialinvestmentbutitputsadditionalpressureonyouandyourpartnersto
ensureifyoufail,whichyouprobablywill,thatyoufailfast.
TIP#7
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AvoidFalsePositives
Succeed or Fail Fast
Whenyoutestoutyouridea
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Negativeresponses
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Someofwhicharefalse
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Positiveresponses
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Someofwhicharefalse
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Falsenegatives
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Incorrectlytellsusanideaisnotworth
pursuingbutatleasttheyallowustofailfast.
Falsenegatives
Thatmeansthatwemaygiveuponagoodopportunityonceina
while.Falsenegatives
Because“failingfast”meanstheopportunitycostismuchlower.
Falsenegatives
FalsePositives
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Thiscausesfounderstostickwithastart-uplongafteritisviable.
FalsePositives
Itshouldbeclearitdoesn’thavearealisticchanceofsuccess.
FalsePositives
Thatmeansforfoundersthe
opportunitycostisextremelyhigh.FalsePositives
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Because“failingfast”meanstheopportunitycostismuchlower.
Whattoremember
