Opportunity #10 is in a big space.
In Late July 13, I took an idea to a Launch 48, a pitching competition & 'hackathon', with the idea to testing it, & perhaps forming a team around it, either for that idea, or maybe another. Not only did we win that competition, but I learned a whole lot in the process.
What we created was a working prototype proof of concept and a business model for a very large startup, called TerraLingo (I'll come to the size of it in a minute), which is a social media language translator, with interesting big data analysis and corporate partnership opportunities.The challenge is that to build something within the opportunity space that we saw,that could scale at a worldwide level, would take easily between $20-30 million of venture capital over 3-5 years. Like many startups in that space, it had a high failure capacity.
The problem was that because most of our team was 30+, and would be initially part-time, no startup accelerator in Australia would've approved our application, which is seen as almost mandatory to obtaining tech VC seed capital. And the normal model means giving up a fair chunk of equity to a VC (often here at very unfavourable terms), in order to get the cash you need to grow the business to a big enough level. To do a startup well, means having cash, and spending that cash wisely, whilst we validate our model, whilst gaining traction and creating revenue.To grow it means a location to operate from, cash to pay for staff, research, services, consultants, advisors, software, business infrastructure etc
Also inherent in the problem for most of us older guys doing a startup, is that we have 'golden handcuffs', - obligations. We have wives (or husbands), kids, mortgages, school fees, lifestyles, etc. Which meant that life for us in a startup requires us to have a new (better) plan, none of which would work for a VC-funded venture (or at least, not for any of the one's I've met).
To make matters even worse, the local VC's that I directly pitched to didn't get it, so seed funding was going to be really hard, which meant we really needed a better plan. As my great mentor, Neville Christie, recently told me -"It's not a lack of resources that you suffer from; it's a lack of resourcefulness".
So the plan expanded to bootstrap through direct customer investment, and create a range of services to allow us to stretch our resulting cash further. We developed a model which should give us access to all the people, resources, mentors, corporate clients & money that we'll need to build out TerraLingo, without VC money at onerous terms (eg 2 x Participating, preferred stock, anti-dilution, ratchet clauses, board seats, controlling interests, and....... the list goes on). My apologies for the jargon.
To get really creative, we looked to our own ingenuity. For example, instead of us paying $7k per person at a co-working space (do the math on 3-12 people), we could operate from effectively our own venue that a separate group/team has setup for us, leaving the cash from that saved expense free for more important costs like marketing & a bigger team; instead of outsource our core requirements, we 'insource' them.
To generate cash, you should also get creative, and by spending our time seeking customer, rather than VC money (often called 'bootstrapping'), we not only would validate our startup but raise the value of the business before obtaining external financing. I'll demonstrate the value of this method in one line:-
Angelist recently raised a Series A round of $24m, on a $150m Valuation - a series A! in doing so, demonstrate how other startups could use them & replicate their model = more value in their clients and their model.
I'll lay out the whole plan shortly, but what we've been creating (on the side) has become a fully vertically integrated accelerator & co-working space model, for which TerraLingo would be an anchor client.
And with the early equity that we don't have to give up to an accelerator or VC, we can reserve a larger slice for the team, and offer some up to group of direct investors, advisors, consultants and mentors to accelerate our growth. Just like Ycombinator & 500 startups do. In effect we create our own VC model - and then allow other startups to piggyback onto our model, expanding it to support "from ideation to exit".
I promised you an outline of how big an opportunity TerraLingo is> to give you a sense of scale, it was announced yesterday that Topsy was acquired by Apple for $200 million, and DataShift is worth even more. Perhaps we were too late to the table, though its a shame that some of our 'clever' VC's didn't get it.
However, we think we might have 'accidentally' created something far more valuable.
You've got a great idea, which might just change the world. You've been to a 'StartUp' event or two, Great, that's the very first of quite a few steps. And that's also where your challenges start.
Current 'Lean Startup' thinking says that you should
- Have a technical or coding background
- get a co-founder
- develop a proof of concept product
- find a worldwide scalable problem,
- apply for entry to an accelerator,
- build a 'minimum viable product' and iterate it often
- Finally,plan on spending the next 6 months pitching to Venture Capitalists, so that you can raise enough seed money to pay yourself $50k pa for the next three, in order to have a 1in 50 shot at a big exit.
What's wrong with this picture?
Well lots, but lets start with 4 things.
- Most of the people I've seen in accelerators are under 30, and don't have the same responsibilities and and obligations as you and I.
- This model is about a VC making long bets on the success of 1 or 2 startups in getting to the next stage, from a pool of often more than 10.
- The terms of funding are substantially skewed in favour of the funder, to the obvious disadvantage of the founders. -
- Funding is hard; its a buyers market; a V.C. will often see 1000+ pitches annually, and will write only 1-2 cheques p.a., and NEVER from a cold pitch.
So what are my alternatives?
"That StartUp Guy" is just right for the 30+ corporate professional, (who perhaps doesn't quite 'fit') possibly with a great idea, & wondering what to do next, and definitely looking for an 'escape plan'. Just like I was, 10 years ago.
So we aim to act as roadmap & a guide for what may lie ahead on the journey to freedom for the 'corporate escapee'.
As well, I'll share my learning from my own bold adventures in the quest for startup success. My stories, questions and answers are real - each & every one has come from my own experiences - to act as a beacon for those already on the journey.
My goal is to help you, by guiding you through the steps, and past the challenges and pitfalls, to turn that 'Great Idea' into reality, whether it's a business, a product, a service, an app, a referral, or just finding an answer to your specific problem.
My blog posts on the entrepreneurial mindset are growing, so via social media, share articles, or connect with me (should be a link somewhere around here, perhaps it's over on the right), discuss my blog posts, post comments and start conversations. You can soon subscribe to startup news updates, to receive a free gift of one of my upcoming books on startups or mobile ideas (we will never send spam to your e-??mail address or sell your information to any other party).
Explore the site, ask questions, seek guidance, and challenge my thinking if you must. And if you are in need of some help with a great idea, contact me and lets get a great idea started.
"Everything we enjoy in society is a direct result of the accumulated learning derived from millions of mistakes. No mistakes, no progress. Yet we still look at making a mistake as embarrassing, wrong, an act bordering on sin. If you're making mistakes, it means you're doing new things, taking risks, stretching yourself. You're growing, learning. And isn't the journey, the experience, not the destination, what life is all about?." -Robert White
After you've done a couple of startups (whether successful or otherwise), you quickly learn whether this is in your blood.
I'm not sure for me whether its thrill, risk, challenge, opportunity, or belonging that is the strongest motivator. After speaking with many other 'tribesmen', its pretty clear that all of these play a part in the decision of those of us that stay 'in the game'. For most of us, its something we were born to do.