Entrepreneurs are an odd group, and I’m speaking as a serial offender. We’re typically A-types, often obsessive, and tend to follow an idea to a fault. Now, these aren’t necessarily bad things at their core; they can each have really beneficial or detrimental results.
But there is one behavior I’ve noticed among many of my fellow business-minded peers that have given me a reason for concern — the overwhelming obsession with profit when planning a startup.
Now, some of you may be saying, “Wait a minute. What does that mean? Isn’t profit the foundational goal of any business? Shouldn’t any startup be thinking about profit day one and every day thereafter?”
I get it. I’m in business, and I intend to do well in business. I intend to make a profit in business, and I think you should too. So, please, don’t misunderstand me. Profit is important. But it is not most important, nor is it foundational to a good startup launch.
Elevating the focus on profit above the other factors in your business is like elevating the symptom of an affliction over its cause. It may bring you short-term relief, and that’s important, but if that’s all you focus on — if that is your sole objective — you’ll spend the rest of your life in the doctor’s office.
Profit is a symptom of a good business, not the reason to have one. So, what is the reason to go into business? In my opinion, it always starts here: There is a problem in the world, and I have a solution for it. That has to be your base. That needs to be your most important reason. Do you know how I know that? Because that is always going to be your customer’s most important reason for purchasing your product or service.
Have you ever heard of a customer coming to business saying, “I was in the market for a better car, and I just thought, you guys make a lot of profit; I think I’ll buy one from you.”
No. Of course not. The customer doesn’t care how much profit you make. They only care that you offer a real solution to a real problem they have. That is the only reason they will purchase your solution. And if you focus on that, if you focus all your energy on building something that solves a real problem for real people in the real world, if you focus on addressing the cause rather than the symptom, guess what happens? The symptoms will take care of themselves. Investors, profit, growth, etc.: these are all results of a business with a proper foundation.
Now, I also believe there are even greater benefits to this mindset. Personal fulfillment is one. If I believe in the reason that my product exists in the first place — the “why” behind the “what” — I’m going to automatically be more fulfilled by bringing it into the world. I’m going to know that I haven’t just put my needs on a pedestal but also, the needs of others. That’s energizing. That’s life-changing; I believe, that’s what the future of entrepreneurship ought to be. More on that later.
Alright, enough of my philosophy. Let’s get to the reason you came here in the first place. Here’s my story, so far…
It started back in August of 2017. I had just begun my first semester of classes at San Diego State University’s Fowler College of Business. And like a lot of young students, I had no idea what I wanted to do with my life. I mean, I knew I wanted to be an entrepreneur. I knew I wanted to start a business… or several. I just didn’t know what they would do.
I had dabbled in entrepreneurial activities earlier in my life: I started a book reselling business at my high-school when I was 15; I built a 24-hour logo design company for business startups when I was 17. And both of these experiences gave me valuable skills related to owning and operating a business. But in truth, neither of these scenarios was going to provide the tools I would need to build something bigger than a one-person shop, operating out of my boarding-school dorm room.
Enter college. If you’ve ever enrolled in a college away from home, you may be able to relate to the next part of this story in a big way. For many of us, a challenging part of preparing for that first semester, away from the comfort of your home, is figuring out who you’re going to live with. Who is going to be your roommate? This single hurdle has filled prospective college students with anxiety the collegiate world over for centuries, and the experience was no different for me. Finding a roommate was, simply put, terrible.
The system, which was managed by the university was clunky and difficult to navigate, ridiculously scant on relevant information, and in the end, left me feeling like I might as well have just spun a roommate wheel of fortune.
As the semester got kicked off, and I began interacting with other students, I found that almost everyone I met had a similar story. How can this be? I thought. Surely, there has to be a better solution to this problem of matching students with other students with which they are expected to live in a harmonious learning environment.
As fate would have it, I lucked out big with my own roommate, and he would be a huge part of turning this shared problem into a massive opportunity.
Like me, and like many students that attend business school, Charlie had a passion for entrepreneurship. A semi-pro surfer from Newport Beach, he had also built a business as a youth — a motorized bicycle assembly company aimed at the surfer community in southern California. And also like me, he was ready for his next creative business endeavor.
After kicking around ideas for about a month in that fall semester, we both believed we had discovered a major problem that deserved a better solution than the one currently being offered. We also decided we had no idea how to build something as big as what we believed would be necessary to solve it.
After discussing our situation with several people within the business school, we stumbled on a fantastic resource called ZIP Launchpad. In its most basic form, ZIP Launchpad is what’s known as a business incubator. It provides knowledge, resources, and mentorship to young, aspiring business-minded people seeking to grow their own world-changing solutions. Most good business schools have something similar, and I would highly advise anyone starting a business to seek theirs out and begin building relationships there. The help we received at ZIP Launchpad proved invaluable many times during our startup adventure and continues to.
There, we learned everything from how to approach the technology aspect of developing a business, to legal advice surrounding copyrights and trademarks, to more specific advice and advocacy, when things began to go a little haywire on our path to startup glory.
But maybe most importantly, it allowed us to not just ask, but develop real answers to the three most important questions for any startup:
1) Do I have a real problem worth solving?
2) Is my solution actually a fit for the people facing this problem?
3) Can my solution be built into a business worth investing in?
ZIP Launchpad allowed us to test those questions in the most practical and efficient ways possible — actual product testing on our actual target audience. We made a mock-up of our service and were able to deliver it to the real people we intend to benefit from. They loved it, and what’s more, they gave us crucial feedback that helped us further understand and refine what the product needed to be and how it needed to function.
People only care about your business if it solves a problem that they have.
Ramping Things Up:
Riding high on the knowledge that we had a real problem to solve and a real solution for it, we decided to move forward with development. Now, this isn’t an article about the thing we built. It’s about providing information to help get you or someone else started down a road of entrepreneurship. It’s about giving back, fresh on the heels of being given so much.
But unless I tell you what this business is all about, none of the remaining information is going to make much sense, so here goes:
We’ve built a networking platform, which allows college students to search for roommates based on specific characteristics — hobbies, interests, habits, etc. It’s basically a dating app for finding your college roommate.
And to build this app, we were going to need money — $500,000 worth. So, we did what any young, aspiring business person would do; we called our friends. And in a few short weeks, we had found an investor who was willing to put up the entire $500K. We were so excited. With this investment, the dream of this business was beginning to form into a much more realistic picture in our minds. This was actually going to happen. Then, the dream became a nightmare.
This investor had demands — big demands — demands that were more in line with an investment in the millions… And they were unacceptable. Without going into too much boring detail, let’s just say that while accepting the contract terms of this investment would have made our dream a reality, it would have, at the same time, placed much of the control over that reality into someone else’s hands. It would have been foolish to move forward with it, so we made the hard decision to back out of the deal. It’s important to note here that the relationships we formed at ZIP Launchpad played a crucial role in making the right decision. They were our constant advocates and helped us understand what a reasonable investment contract should look like for a startup like ours. And, though it was a major letdown, that advice made our decision to walk away from the investor an easier one.
Surround yourself with people that know more than you, and rely on them.
The blow of losing our investment was huge, but we had to recover. By this time, late in 2018, we were approaching a critical juncture where if we didn’t start developing the app soon, we would miss the hugely important admission window for the 2019/2020 school year. So, we hit our contact lists hard. We called every friend and family member that we thought might be a possible investor. We knew there was no way we were going to be able to raise $500K in the short amount of time we had left, so we also went through an aggressive round of rethinking our business model and decided we could make it work for $100K. And we got it; we got the funding we needed and began app development right away.
We did our due diligence, found an app developer we liked and even ran the contract for services by an executive contact we had made at Sony. Then we spent $64,000 of the $100,000 we had collected on the application developer. That would later prove to be a big mistake.
This app developer seemed legit. They had built several other platforms, which looked and operated fine and made us feel comfortable that they would be able to deliver the desired product by the desired time.
That desired time was March 1st, 2019 — the beginning of admissions for the three Universities we planned to bring this app to at launch. The three schools were the University of California Berkley, California Polytechnic Institute San Luis Obispo, and San Diego State University. The main strategy was to attend their “exploration days” and interact with students we knew would be looking for a roommate.
The first campus visit was approaching. We spent thousands on advertising and a platform to collect sign-ups from students. Everything was set, and our small team was gearing up for a successful day on campus at SDSU. Then, the week before the event, our software consultants informed us that the app would not be ready. It wouldn’t even be available for pre-order.
This was devastating. We had built our entire launch around an expectation that March 1st, we would be able to sign students up on the app and give them all the time they needed to create their profiles and start searching through a quickly growing database of roommates. Now, we wouldn’t even be able to show them a placeholder on the app-store.
So, we switched up the strategy. In the days leading up to the event, we spent another large sum of money retooling our marketing materials and shifted our focus from downloads to gathering emails. We would pitch them about the app, then collect their email with a promise of letting them know when the platform was up and running.
In truth, despite the setback, the day went awesome. The students and parents alike were extremely enthusiastic, and we ended up with the most valuable things a business owner can get: facetime with the client. Tons of it. Charlie and I, our five hired ambassadors, running around in our branded yellow t-shirts, collected around 400 emails in those five hours. Though a smaller number than we expected for sign-ups, that was still a good result.
The next event would be on April 11th at UC Berkley. We sat down with the app developers and expressed the importance of having the app ready for this next event. You have to understand, admissions only last until June 1st; after that time, the app, at least we had assumed, would become useless. By then, everyone would already have a roommate.
So, we started our preparations for UC Berkley, and like before, we were given the full confidence of our development consultant that the app would be ready. But like SDSU, we were let down again. This time, in the weeks leading up to the event, they assured us that the app would be ready. But on the eve of the campus visit, we found out otherwise. The app had not passed crucial requirements in the app store and would not be ready for use.
This time, we had spent even more money on marketing materials and had to spend the same amount, the evening before the event, redoing them … again. But, like before, we made the best of the situation and ultimately, turned the visit into a success. The next visit, Cal Poly SLO, was only two days later; and by that time, we knew it was too late to have the app ready. So, we attended with our backup plan firmly in place and gritted our teeth as we watched the clock tick out on the three most important days of launch
In all, we collected over 800 emails, which was a good result. But we couldn’t help but wonder what the count would have been with a functional program. Likely upwards of 1,500.
Always give yourself more time, but be dedicated to improvising if things go wrong.
Progress After Launch:
The app was finally ready for launch on May 2nd, 2019, sixty-one days late. And with only thirty days left in the admissions window, we wasted no time sending notifications out to the emails we’d collected, as well as executing our other marketing channels. To our great excitement, the response was fantastic. The response rate was high, and people immediately started using the platform. We were ecstatic.
Here’s a summary of where we ended up: Our platform helped solve a problem for 2,000 students, and over 25,000 connections were made in just 90 days. On top of that, over 50,000 messages were sent, 26,000 friend requests, and 125,000 swipes. Amazing.
But something happened that neither Charlie, I, nor any of the relationships we’d built at the incubator had expected. After June 1st (the university roommate deadline), people kept using the platform. Not only that, but more people were downloading the app and signing up every day. In fact, the user base doubled within two weeks of the close of admissions and continues to grow today. What we would discover about the app — why people were continuing to use it — would ultimately prove to be an entrepreneur’s biggest hope for their product. They were using it in ways other than what we had designed it for. It was as if they were saying, “Yeah, I know you said this was for X, and that’s cool and all, but I’m going to use it for Y and Z also.”
For now, I won’t tell you what these new uses for the platform are. You’ll have to wait for a future article on that. But what I will tell you is that the discovery of these additional uses has led our team to make some exciting changes in how we see the platform and how we think it can change the world moving forward.
Currently, we are in the process of raising another round of funding to achieve important milestones related to this new vision.
Ultimately, that is what this is all about. We didn’t set out to make money (at least not yet). We didn’t set out to become famous or stroke our egos. We set out to solve a problem, to help people — to change the world for the better.
Now, there are a lot of ways to do that. You might have a passion to become a doctor and heal people. You might want to make a major innovation in the energy sector. Or, you might want to start a family and be a great parent. These are all fantastic ways to change the world, but they all have one thing in common. They all start from a place that is focused on solving real problems in real people’s lives with real solutions.
I think this generation has an opportunity to completely rethink what it means to be in business, what it means to be an entrepreneur. We can be the generation that thinks about the future, solving problems with the future in mind, rather than the present. But it has to start with an intention to affect that change.
There are many ways to change the world. For now, my channel is entrepreneurship. What’s yours?