Your idea is sh*t and no-one will buy it
Here’s a familiar scenario: an entrepreneur has an idea which they decide to turn into a business. They quit their full-time job to spend time and money developing the idea from the comfort of their living room, garage or trendy office space. They launch the product to the market, gambling their last salary on the success of the launch. Customers don’t bite. The money is lost. The business folds.
What do you do if the market doesn’t want your idea? We asked Craig McLeod, founder of Build, an entrepreneur and venture capitalist.
Persistence and determination
One of McLeod’s favourite quotes is by Calvin Coolidge, 30th president of the United States of America: Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent.
McLeod offers this as a mantra to any enthusiastic startup founder. After all, he says: “It’s very cool and romantic to say you’re running a startup. But ninety-five percent of the people I meet lack the substance and character to be entrepreneurs.” By substance and character, McLeod refers to the emotional stamina — the persistence and determination — required to start a business, stick to it and see it succeed.
McLeod’s cynicism is well founded: “of the 10 million startups that occur annually only one percent will get funding; and only one percent of that one percent will survive,” he explains. But even with those personality traits to support an entrepreneur as he or she navigates the uncertain world of entrepreneurialism, there is still no guarantee of success.
McLeod lists the non-negotiable elements that must be present in order for a startup to succeed: empathy for the customer’s problem, a scalable product that customers want, a budget to cover costs for two years, and a good marketing plan.
Ideas are worthless without world-class execution
Conventional wisdom dictates that a great idea is the starting point — the notion that ‘if you build it, they will come’. But McLeod calls this the ideas syndrome. “Just because you have an idea, you don’t have anything. Ideas are worth zero. World-class execution is worth 10%. Customers are worth 90%,” he says.
That 90% is the driving influence on the shape and functionality of the product even before it’s developed. McLeod insists that the customer’s is the most important voice in a startup that will determine whether the business will succeed. Quoting another Cooledigeism, the slogan ‘press on’ has solved and always will solve the problems of the human race, McLeod says that ultimately, customers will only buy a product if it solves a problem for them: “The key is to take the time to find the customer’s core problem at the outset. What’s their pain point? Develop a solution which the customers are willing to pay for and then validate the market for the product.”
That said, if the product is validated and the customers are prepared to pay for it, does that guarantee safe passage to startup success? “No,” says McLeod. “Your team needs to have customer empathy. You don’t need to have all the functionality, but you must offer a good user experience and be good at marketing. The customer’s voice is the only voice that matters: they vote with their wallets.”
Never look for money when you don’t have any
When it comes to securing funding and dealing with venture capitalists, McLeod is unequivocal: “You need to start looking for money around seven months before you run out of your own.” This depends entirely on location, however. In South Africa, it could take up to a year to secure funding. Elsewhere, the lead times are shorter.
This is why it’s important to have a clear runway of money that will sustain the founder for at least two years — and McLeod insists that founders should never give up their day jobs until they have a validated product that customers want.
Regardless of where the business is, one principle rings true for all ventures: “Never look for money when you don’t have any,” says McLeod. Venture capitalists will use that as a point of weakness, to negotiate onerous terms. And, speaking of onerous terms, McLeod is clear on another point: funders are wary of South African labour law, business tax regime, intellectual property exit laws, among other constraints. In addition to a too-small funding pool, the country’s draconian business environment is a significant obstacle to building viable, scalable businesses. He recommends that startups incorporate elsewhere, even if they operate from the shining shores of Cape Town.
But all of this is academic until the entrepreneur has identified the most important thing: how to solve the customer’s problem. Ideas don’t exist until they’re executed properly. Because even if the product does exist, if no-one likes it, no-one will buy it. It will remain an idea. And ideas, as we know, are worth zero.