Whose money you should NOT take from investors?

In the competitive market, what kind of qualities should entrepreneurs have? When you are fighting in the market, whose money you should not take? Where is the next opportunity to start a startup?

In May 2015, there were three big area to consume according to the Mary Meeker Report. The first one is “living”, the second one is “moving” and the third one is “eating”. In these three areas, because the consuming power is very huge, the competition is also the biggest.

For example, at the beginning of 2014, taxi grabbing services became a very hot area. Hundreds of billions were invested and many companies are still competing in this area. There are still many uncertain factors remained at last because there is too many money, But if you want to enter this kind of hottest market, the early team is very important and money do NOT decide at last.

The growth of a team should be differentiated twice and be positive.

The executability of a team is essential, especially a team can run fast. What is this kind of teams meaning? Business data curve should be differentiated twice and get a positive number. Differentiation once is positive and twice is zero means a linear line. No matter how high is your gradient, the space for imagination is limited. What means differentiation twice and be positive? That means exponentiation. Differentiation twice and be negative means a parabola. Therefore, at the early stage of investment, we always bet for those projects which is differentiated twice and be positive. From founder to team, everything can be decided, acted and landed quickly and efficiently.

Some people believe that only products for consumer and O2O products need executability, but products for enterprise need sandpapering. However, detailed sandpapering also needs executability though products for consumer emphasize more product experience and O2O products need stronger offline executability to support.

Except the executability of the team, the fascination of the founder is also very important when the team runs fast. Because a team needs talents to expand rapidly, you need to grow your team to catch up the development of your business during fighting with other competitors. So you have to recruit the best talent as quick as possible and make him work with the team with loyalty. This is actually a difficult point. The recruitment of startups is known publicly as a difficult issue, Limited money, long working time and poor welfare makes them hard to compete with big companies. You have to find the ones who can sympathise with your value and the future of this business to fight with your team to improve the product and get the market share. Therefore, except to make things from 10 to 100, a startup also needs a wide vision and team management ability. You have to fight with your team but not only yourself.

Money do NOT decide everything.

When you begin to fight at the hottest area, you need a turning point. What entrepreneurs need to do is to burn the paper full of oil. You cannot take action when everything is still not prepared. For example, many people wanted to do EC business in China around 2000. But the online payment system was still hard to use and the users still did not have the behaviour to pay online. Moreover, the distribution ecosystem was nearly 0. That’s why many startups failed at that time. Therefore, startups cannot think to lever a well balance market. You have to wait an external force to break the balance including policy, new technology and so on to find the point of penetration to break the market quickly.

Entering the market in an early time is same as the late time. When the competition become deadlock and needs some external factors to break the balance, the external factors may be the change of policy or whether the team chose its investor correctly. If you can choose your investor correctly, you can not only get supports from resources and networks, but also move with your team during the key time. If you startup your business in the hottest area, remember NOT to choose a conservative investor. When the competition turn white-hot and needs defying death, the determination of investor is very important. If the investor are not enough brave to fight to the biggest company to reverse the situation at the right time, anything won’t be changed at last.

Where is your chance?

When the bubble of real estate in China, the concepts of shared economy and C2C didn’t exist still. There was a word called P2P (person to person) before. P2P model can increase the utility of the society and it can use the idle resources to increase the supply. Actually many business such as Airbnb and Uber succeeded by this model. This kind of shared economy models still have many chances to develop especially in the area of transportation, real estate and foods. For example, parking space sharing, takeout service, travel, transportation and many things still have many chances. Anyone can do well and go ahead with their own styles.

Entrepreneurs should focus on the advantages they have but not always turn to the hottest market. When you do something you are not familiar, the failed rate is much higher than you think. At first, the team is hard to build because you know nothing about it. How can you find the right team and talents? So you can only try your luck and fail easily. What means a hot market is many opportunities created to everyone. You should figure out whether the opportunity is YOUR opportunity but not enter it blindly.

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