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Why ‘Startups’ aren’t for everyone
2008
As the cataclysmic financial crash ricocheted around the world, hordes of shirkers lost their cushy jobs at bloated corporate institutions that had been feeding off the masses for decades. Perhaps this sounds a little harsh, but change comes at a price to everyone. How many of those individuals, comfortable and waiting to collect their pensions, could see the writing on the wall and did nothing to draw more attention to it?
Suddenly, people who had been coasting for years were faced with the prospect of having to work for a living. But it wasn’t just the slackers and slouchers that suffered. Hardworking, salt of the earth, blue collar workers were hard hit too, as were young graduates with degrees that should have guaranteed them a foot in the door. And this wasn’t just limited to first world countries, the repercussions from these events were felt around the globe from the USA and Europe to Greece, India, Latin America and even South Africa where I live.*
People watched the news, filled with dread, as they waited for the next corporate powerhouse to collapse. The recession sent ripples around the globe. A tsunami of unemployed people, crippled with fear and wondering where their next paycheck would come from, contemplated whether their homes would be taken away from them and agonised over what they could do about it. And it wasn’t just the workforce that had been hard hit, pensioners watched their life savings dwindle to nothing. State and local government sectors faced huge budget deficits and found that they were unable to provide even the most basic of services to their communities.*
The average age of a homeless person
is 9 years old.*
In 2008, the three most commonly cited causes of homelessness for persons and families were a lack of affordable housing, poverty and unemployment.
More than 3.5 million people are homeless every night, and 1.35 million are children. Of the 31.1 million people living in poverty, more than 12 million are children.When one looks at the statistics, its frightening to imagine that more than 12 million children, the future of our world may not survive to adulthood, much less become contributing members of society rather than a drain on the economy.*
So what do we do to resolve this situation?
Is it our responsibility or do we, who have jobs or businesses, look the other way as we hurry down the street to work?
Or do we create jobs?
A place for these people to go; to contribute to society, to uplift themselves, and to become active participants in our future economy. If we don’t consider these people now, the future will be very bleak indeed.
Who will buy our products or services if most of them don’t even know where they’re going to sleep at night?
The cost to humanity will far outweigh the cost on the balance sheet of a global conglomerate that serves its directors and shareholders first. Once the dividends are paid, a small percentage of their marketing budget is allocated to charitable acts that can be used as Public Relations collateral filmed and filed on Youtube, Facebook and Twitter in the hopes of causing a viral sensation.
So what does this have to do with Startups?
One of the accidental consequences of the Crash of 2008, was the unanticipated boom in the entrepreneurial sector. Many people who had previously preferred to remain in their comfortable jobs that they’d been doing for 20 years, now faced with unemployment, took the opportunity to reinvent themselves. Others chose to follow the dream and risk everything on that one Big Idea that they had always believed was going to make them rich beyond measure. And so the deluge of ‘Startups’ began to rain down on the desiccated plains of the business sector bringing much needed life and vigour into a battered and flailing economy.
Crowdfunding, Venture Capital, Angel Investor, Incubators and Bootstrapping became the buzzwords of the ‘noughties’.
But one would need to first understand what exactly a ‘Start Up’ is to understand why, in the long term, perhaps it is not necessarily going to save the world.
According to most sources, a ‘Startup’ is a company in the first stages of operation that has been largely funded by the entrepreneurial founders (bootstrappers) in order to develop a product (most often technology related) for which they believe there is a sustainable demand.
You can read more about the How Funding Works here.
A lack of sustainability, due to high costs, limited resources and revenue in a fiercely competitive market is probably the key reason many startups fail. Most entrepreneurs are passionate about their product but often lack the fundamental skills required to run a successful startup (and this is true of a small business too) and in many cases cannot afford to invest in the people who do. So they start looking for venture capital, angel investors and incubators to help them take their product offering to the next level. In recent years, obtaining finance via these avenues was fairly easy, particularly in the tech sector as investors looked for opportunities to speculate on these new types of business that had not existed prior to the advent of the internet.
What people often forget is that for every Apple, Amazon, eBay and Facebook, there are tens of thousands of other startups that never saw the light of day outside of the family garage.
Capital is not the only reason many ‘startups’ fail.
Many entrepreneurs find it difficult to focus as the very nature of owning a startup enterprise requires making decisions on the fly. They often become bogged down by the mundane day to day running of the business. They are often indecisive and unclear in their goals, perhaps becoming too focused on obtaining funding than establishing relationships with the consumers who will ultimately buy their products or services.
Research is another key area that is often forgotten in the race to get their product in front of the customer before the opposition. Saying you’re running a ‘startup’ can seem glamorous and exciting but if you haven’t done the research, you can’t be sure that your idea has sufficient merit to pursue it and all the passion in the world won’t guarantee success or even funding.
So what about just opening a small business?
How is a startup different from a small business?
In order to provide some insight, I’d like to share some of my own personal experiences. We left the ‘big smoke’ in 1998 where we’d worked in the deadline driven corporate world of advertising and settled in the small rural village of Wilderness along the southern coast of South Africa.
In 2001, we opened our own art gallery featuring my husband’s, Peter Pharoah’s (www.peterpharoah.com) artworks and print collection. Using the internet, we sell online as well as through the gallery itself. We have a few other selected galleries in Cape Town that carry his work too. You can read more about our experiences here. Expansion has come up often during the 15 years of operation but in each case, after careful consideration and deliberation, we have opted not to go that route as it brings with it a lot of extra complications.
As a sideline, I also run a small marketing and design consultancy offering advice based on my years of experience in the advertising industry. In 2009, my partner and I launched our own ‘startup’ CMS system. (This was my ‘Big Idea’) Six years on, we’re still in operation but we have to continually adapt in a fiercely competitive market where technology is evolving ever more quickly. It is difficult for us to keep pace while competing against the likes of Wordpress which is now accountable for a huge proportion of websites around the world — a whopping 71% of English language websites are created using the platform. You can read more statistics here: https://wordpress.com/activity/. So at this point, we would need to start upping the ante and look for an injection of funding to continue to develop the system. Is this something we want to do? I’m not sure…
For every tech ‘startup’ there are 1000's of people who simply don’t have the qualifications or skills to guarantee success in such a highly competitive market but that doesn’t mean that they can’t own their own business.
So what about something simple, community orientated, something local? Something that makes best use of YOUR unique talents and skills. Chefs creating artisanal breads, seamstresses producing customised soft furnishings. Woodworkers, metal workers turning their hand to exciting projects that harness their earning potential in a market that is experiencing a renewed interest in repurposing materials into great furniture and fittings. Or possibly even teaching these skills to the less fortunate and marketing their products at local markets or via a collective using sites such as Etsy and Shopify. These are just a few of the ways to bring about social and economic change. The opportunities are endless and there are often programmes in place that provide funding for initiatives of this kind.
Even the White House has a recycled plastic chandelier made by Magpie, a small company based in a rural area in the Karoo, South Africa.
The informal sector presents an opportunity to provide employment for the people around you? This will boost the local economy, reduce poverty and crime while taking care of your needs and supporting your family. These are all noble intentions and can be just as, if not more, rewarding as fronting a ‘startup’ which has the potential to make you millions but at what cost to your health, your family and your bank balance if you fail?
In many cases, owning a small business provides an opportunity to achieve goals that are not only far more attainable but sustainable too and will provide a great deal more satisfaction with far less stress.
So can we ask ourselves:
Is this perhaps where the future lies? After the hurricane of ‘going global’; is ‘building local’ going to become the new future of global commerce, bringing unique and diverse products to a brave new world whilst preserving cultural diversity and limiting the impact on our dwindling natural resources?
So do you really have what it takes to run a startup? Or maybe you should harness your unique skills by considering other options and start making a difference in our world today and help build a future for all the world’s children tomorrow and beyond.
This post is dedicated to all the entrepreneurs, start up founders and small business owners — we salute you.
- Global Recession as seen by Forbes Magazine Statistics quoted: Open Door Mission Additional information via Wikipedia
