A few weeks ago, after almost a decade of pitching, the tables turned, and I was on the other side of a pitch competition – judging the founders sharing their ideas. Eight companies gave presentations, and I’ve decided to provide unified feedback to all of them in the form of this article.
Keep in mind that this was a super early-stage startup event in Ottawa, Canada – not some high-rolling elite event in the Valley, where some of the feedback I’m about to share might seem commonplace. But I believe the challenges facing startup ecosystem development are similar to those facing education: we won’t solve the problems of education simply by having Harvard produce more and more qualified graduates; likewise, we won’t create stronger startups by focusing only on the major technology hubs. Just as we need to make all higher education institutions better, we need to empower people outside the major business hubs to gain the knowledge, support, and courage to pursue building businesses that can help us solve the world's hardest problems.
Think Bigger
I’m convinced that building a big business is actually easier than building a small business – it’s easier to raise money, it’s easier to recruit top talent, and it’s easier to win big customers if you have a big “story” to tell. Everyone wants to be a part of something big. All we have to do is show them how.
The flip side of this coin was the subject of an ongoing joke from the TV show “Silicon Valley” about every company wanting to change the world when in fact very few do. It’s important to be both realistic about what your business does but also willing to push you and your employees up the “vision ladder” as far as you can towards changing the world, even in a narrow sense.
As feedback to the startup competition group, I’d strongly discourage you from starting a Canada-only business. At the very least go for all of North America, but even better would be the entire world! You don’t need to do this right away, but you do need to have it as your ambition.
Having a BIG ambition forces you to think differently in order to actually achieve it. If you believed you needed to sell into 100 businesses over the next 5 years, the strategy and speed you’d show would be nowhere near what you’d have if your target was to get to 10,000 (see below). You need to think and then do what no one else is doing.
Move Faster
Startups are an attempt to beat the odds. Time works against you here, so you must find ways to shrink timelines as much as possible. In building a business, everything always takes longer than planned, so you cannot afford generous, realistic timelines – they have to be unrealistic, and you need to find ways to make them work. You must “assemble the plane after you jump off the cliff”. As a rule of thumb, I’d set a target for the first 5 years to triple, triple, triple, double, and double your business. Now that’s an exciting story.
Project for More Costs
It’s hard to know how much things cost and what you’ll need to start, let alone scale, a business. Many costs become known only once you incur them, so I understand the challenge of estimating early on what those costs will look like. I consistently noticed in the startups at the competition that their projected headcounts and costs were wildly underestimated. In particular, I saw the following:
Not taking into account the management layers needed to run growing organizations, and not accounting properly for the associated costs.
Underestimating how expenses like legal, software, and administrative add up fast and must be accounted for.
Not recognizing that sales and marketing costs can easily be 40% of your revenues. And as far as the estimated cost of customer acquisition goes … you need to double your best guess to be safe until proven otherwise.
Projecting for higher costs can force you to find ways to generate more revenue. It’s always better to end up with higher revenues and lower costs than the other way around.
Put Your Team Forward
I was disappointed to not see more emphasis put on the individuals in each team who were presenting the ideas. This is, perhaps, because those who’ve never run a successful business tend to overestimate the importance of a “business idea”. But building a business is less about the idea and more about the execution – and that comes down to the people behind the business.
I was once a 25-year-old with very little experience, so I know very well what imposter syndrome feels like. But don’t be intimidated by the years of experience someone else may have – focus on what makes you and your team the right team for your business! Focus on the things that you can control: the hustle and hard work you’re prepared to put in, your relentless desire to win, your passion to learn your market inside out, and your ambition! No matter what experience you may or may not have, you can’t build a successful business without the above, and these are things you can have right now.
Attitude Check
Despite what I just said above, experience does matter. As you get more of it, you’ll see the same patterns emerge, and you’ll be able to connect the dots faster and more effectively. However, no one can have 100% knowledge of every industry or of the future. Otherwise, there would be no investors missing out on [insert any successful startup].
Yes, sometimes investors (or pitch competition judges) may have experience in the space where you are building your company, but they don’t know you, they don’t know your customer as well as you do, and they may never have time to understand your business the way you do. They can attempt to interpret it through the lens of their own experience, but you are the one running your company. Even if you receive negative feedback, you don’t need anyone’s permission to proceed with building your business to match your vision – investors (or pitch competition judges) get it wrong all time.
Good luck!