How to Become an Entrepreneur: 9 Lessons for Noobs
On June 14th 2016, my business partner and I founded Immersion Arcade — the United State’s first HTC Vive virtual reality arcade. We were open for 4 months and made $17,000+ in revenue before pivoting. Since this was my first foray into the startup world, I learned a lot through trial-and-error.
In this article, I wanted to share the most valuable lessons that stand out in hindsight. This article is intended for those who want to become an entrepreneur, but have little-to-no experience — in other words, for myself two years ago.
Lesson 1: Average People Start Businesses
When I first committed to the arcade, I didn’t think of myself as an entrepreneur at all. I had no problem thinking of my business partner Brian Jesse as an entrepreneur; he was a wiz-kid programmer who five years earlier left a comfy job at Wolfram to pursue the startup world. Me on the other hand… I was a Fine Arts professor who never took a business class in my life!
Every time I told Brian that I felt like a phony, and that I had no idea what I was doing, he responded, “AVERAGE PEOPLE START BUSINESSES.”
He reminded me that every business was started by someone who, at one point, was not a business owner. Business owners aren’t born knowing how to business, just as pianists aren’t born knowing how to piano. They are ordinary people who decided to take the leap and have been figuring it out ever since.
Armed with this phrase and Amy Cuddy’s TED Talk, I decided to fake being a business owner. And one day, I was a business owner.
Lesson 2: Anyone Can Become an Expert
Another phrase I relied upon in my early days was inspired by something Kevin Kelly said on “The Tim Ferriss Show”:
“One of the things I want to emphasize is that right now, basically, there are no VR experts. It’s completely open. Really, we — collectively, humans — have no idea how VR is going to work… And so that means that a person out there listening to this could easily become a VR expert… There is so much that has to be invented, and… somebody who just decides that they are going to work at this everyday, or every day on weekends, or whatever it is, can make a huge advance.”
Kevin Kelly, founder of WIRED magazine. (Click here to hear the full clip.)
Although Kelly aimed this advice for the fields of virtual reality and artificial intelligence, I believe it translates at large. Anyone can become an expert if they decide on a niche, explore it regularly, and share what they learn.
Kelly referred to Kent Bye as an example. In 2014, Bye started recording interviews at VR conferences and releasing them as the Voices of VR Podcast. Now, he has recorded over 750 interviews and runs the podcast full-time! He’s become an expert, all because he regularly explores a niche with others and shares what he learns. (If you are interested in VR, I highly encourage you check out the podcast and support Kent via his Patreon!)
Even if your field is well-established, you can become an expert of a unique sub-niche within the field. In his book The 4-Hour Work Week, Tim Ferriss said to think of two separate niches you are a part of, and connect them. For instance, you could become an expert of VR and yoga, AI and veterinary science, AR and natural building, Plato and cooking, and so on. The more disconnected the niches, the more pivotal your work will be.
Austin Kleon summed this up in his book Show Your Work! when he said:
“The best way to get started on the path to sharing your work is to think about what you want to learn, and make a commitment to learning it in front of others.”
Lesson 3: Join a Coworking Space
If you are brand new to entrepreneurship and take nothing else from this article, seriously consider joining a coworking space. A coworking space is essentially an office shared by multiple entrepreneurs, including freelancers, small business owners, and remote corporate workers.
When I was getting started, my coworkers taught me every foundational business principle I needed to know. They were like a council of experts that I could ask for advice at any time. Everyone had specific strengths that I could utilize when I was out of my element, and everyone could utilize my own strengths when they were out of their element.
When we needed to form an LLC, a peer walked us through the process since he’d recently done it for his startup. When we needed an email list, another peer explained MailChimp. When we were launching a crowdfunding campaign, another peer reflected on his experience launching one and sent us his collection of articles about best practices.
As Tim Ferriss once said on his podcast, there’s two ways to track down the solution to a problem. The less efficient way is to research the answer. The more efficient way is to ask someone who knows the answer.
Lesson 4: Networking Is Everything
Another reason to join a coworking space is because it will grow your network, and networking is everything. To illustrate, let me share a story.
Our coworking space hosted a 1 Million Cups speaker series every Wednesday at 8am. One morning, I struck up conversation with a woman and man at my table. When I mentioned the VR arcade, their interest heightened and they bombarded me with questions. It turns out, she was Head of IT for our home town and he was Assistant to the City Manager. They thought there was potential for a partnership between us, so we arranged a follow-up meeting.
Fast-forward to the meeting. Both of them show up… and so does the director of the public library, the marketing director of the library, the exhibit manager of the children’s museum, and the mayor! We were stunned. We explained our vision and gave demos to all. (Here’s a clip of the mayor in VR during this meeting.) After that, we ran VR for every town event, which attracted tons of new customers to our arcade and even got us featured on the local news.
The moral of this story: Had I slept in that day, or stayed quiet at my table, I would have missed this opportunity completely.
More examples of networking that paid off:
- A guy in our coworking space’s wife worked in a building with a vacant room. The owner of the building offered us the room for an absurdly cheap $500 a month. This became Immersion Arcade’s location.
- Kevin Williams (of the DNA Association) cold-emailed us some survey questions, which I answered. Later he connected us with Neil Schneider, who invited us to sponsor his Immersed 2016 virtual reality conference. We presented, ran 14 HTC Vives, and were featured on the Space Channel and MTV Canada. (It was also our first time in Canada!)
- In a Facebook review of our company, a friend mentioned that we planned to host tournaments. I responded by challenging CTRL V and VR Junkies. This started a friendship between our companies. Months later, we hosted and livestreamed the first-ever international VR arcade tournament.
As Derek Sivers said in his article “How to get rich”:
“Meet everyone. Pursue every opportunity. Nothing is too small. Do it all. Like lottery tickets, you never know which one will win. So the more, the better. Follow-up and keep in touch with everyone.”
Lesson 5: Never Stop Learning
Starting a business is a high-risk endeavor—but not all risk is inevitable. Some risk can be avoided. To distinguish between inevitable and avoidable risk, you must learn what has and hasn’t worked for others. This means that if you are brand new to the startup world… you have a lot of catching up to do!
After I committed to the arcade, I constantly listened to entrepreneurial podcasts, audiobooks, and YouTube videos. I recommend noobs constantly surround themselves with educational media because, if you are the average of the five people you most associate with, you may as well digitally surround yourself with successful entrepreneurs as much as possible.
I personally love audio media because I can passively learn while carrying out the mundane activities of daily life. A story about this: When I first joined my coworking space, a coworker recommended I read Peter Thiel’s “Zero to One.” I bought the audiobook and listened to it twice over the next few weeks, putting it on whenever I was walking, driving, cleaning, getting ready, etc. Later, I found out that my coworker had a physical copy of the book and hadn’t even finished reading it yet… so eventually I was sharing lessons with him which he hadn’t gotten to!
Some podcasts I’ve learned a lot from:
- The Tim Ferriss Show
- This Week in Startups (This Week in Startups)
- Entrepreneur on Fire
- The James Altucher Show (James Altucher)
- Voices of VR Podcast (to stay up-to-date with virtual reality news)
Some writers I’ve learned a lot from:
(Who are your favorite learning resources? Please share in the comments!)
Although I’ve always surrounded myself with educational media, I noticed two things changed when I committed to the arcade. The first was I could immediately apply what I learned to my business, which helped me better understand the information. According to Edgar Dale’s Cone of Experience, we remember 20% of what we hear and 90% of what we do. My business served as a sandbox where I could “actively do” what I was learning.
The second was that I became more valuable to everyone else in my coworking space, since I could relay what I’d learned with them. Sharing what you learn is a mutually beneficial arrangement: the other person gets free guidance, you reinforce your understanding of the advice, and it helps to establish a friendly relationship between you, growing both of your networks.
Lesson 6: Go Lean or Go Broke
Before you invest in your startup, learn about lean startup methodology. Watch YouTube videos, read Eric Ries book, read articles, listen to podcasts, and talk with others about it. It can be a complex subject to wrap your head around, but the more you apply it, the more likely your startup will succeed.
The core idea is this: Don’t spend $100,000 building a product, then release it and hope people will buy it. Instead spend $1000, or $100, or $10 building a “minimum viable product” (MVP) which does just enough to be marketable. Then release your MVP, gather market feedback, and use that feedback to figure out how to best invest in your product moving forward.
In other words, don’t make something then see if people will buy it.
See what people will buy then make that!
Maybe people will use your MVP as you intended, but maybe they won’t. Maybe a feature you thought would be popular is never used. Maybe it’s used by a totally different demographic than you expected. This is why you build MVPs fast and cheap; you need real market feedback so you know you aren’t wasting your time and money building something nobody wants.
Lean Startup in Practice—VR Arcade Style
So let’s say you’re starting a VR arcade and want to totally disregard the lean startup approach. You could sign a 5-year lease for a massive space in the heart of downtown and fill it with 16 HTC Vives running on the best computers with the best commercially-licensed games available. Hell, why not throw in a few SUBPAC’s and Virtuix Omni’s while you’re at it!
If your arcade succeeds… Yippee!! Hooray!! I’m so happy for you!!!
But if it fails, you are now $200,000 in debt.
So now let’s say you want to use a lean approach. You could buy one HTC Vive with a decent computer, sign up to the Steam Site Licensing Program for free, and install one commercially-licensed copy of The Lab, which is also free. You can practice running VR demos for friends and family, and then once you get the hang of it, do free VR demos for local businesses and the public library. Bring business cards and promotional materials to pass out, and have an email list people can sign up to. Eventually, someone is bound to want to book you for their own private event. Let them, and charge them a high fee.
Now you have hard evidence of market demand, a list of potential future clients, networking connections with local businesses and the library, and you’re making a return on your investment… all for maybe $3000.
The table below illustrates more realistic costs of this hypothetical scenario, including a more reasonable 3-year lease and insurance:
Note: The reason I’ve only mentioned the HTC Vive and not the Oculus Rift is because Oculus does not allow commercial use of the Rift, in accordance with sections 3.1 and 4.1 of their terms of service.
Lesson 7: Slice the Pie Fairly
Let’s say you and three friends are starting a company. Awesome! Now, how do you decide how much equity each person gets? How do you “slice the pie”?
At first you might think, “Well, let’s split the company equally between all four of us.” That sounds fair… until you fast forward a few months or years, and one founder puts in 75% of the daily work and the others barely do anything anymore. What seemed fair at the time, doesn’t work anymore.
When Brian and I started the business, we split the company 50/50. It worked great for us… but after a few months, our business had grown a lot, so we wanted to bring more people onto our team. But now… what do we do about the equity? We’d worked our butts off building the business from nothing… so how much of “the pie” should we give to a newcomer?
When I asked this question to our advisor Doan Winkel (who runs this awesome Teaching Entrepreneurship blog), he recommended I read Mike Moyer’s “Slicing Pie: Funding Your Company without Funds.” This book provides a universal equity model that solves this problem.
The “slicing pie” model is complex enough to warrant buying the book, but the basic idea is equity should be rewarded to each person based on the amount of time and money each invests. It uses a dynamic approach to equity, meaning that it changes in real-time based on everyone’s investments. In other words, the more you put into the company, the more equity you get out of it—relative to everyone else’s investments.
To learn more, check out this video of Mike Moyer summarizing the model.
Had we used the “slicing pie” equity model from day one, we would’ve known exactly how much equity each newcomer deserved.
I recommend all startups incorporate the Mike Moyer | Slicing Pie model into the company as early as possible. Even if you are a solo entrepreneur, but there’s the remote possibility that you might one day bring other people onto your company, it is probably a good idea to start using this model today.
Lesson 8: Share Your Idea with Others
Sometimes aspiring entrepreneurs keep their startup idea a secret. They think their idea will make them millions, so they don’t want their idea stolen, along with their millions!
A common phrase that went around my coworking space said the opposite:
If your idea fails, it’s because you didn’t share it with enough people.
Don’t Be Scared to Share
You shouldn’t be scared to share your idea, because the idea is the easy part. The hard part is the sheer mass of time, commitment, skills, and suffering it takes to turn “a good idea” into “a legal company selling a functional product.”
“Ideas don’t make you rich. Great execution of ideas does.”
Just because you share an idea with others, doesn’t mean they will execute it; and since great execution of an idea requires a total restructuring of your life and priorities, it is highly unlikely that the other person will drop everything else going on in their life in order to execute your idea.
Sharing Helps You Gauge Interest
Sharing your idea is a great way to get early market feedback since you can see how other people react.
I can’t remember the source, but Derek Sivers once said that you don’t want to invest in the idea that makes people go, “Oh, that sounds cool!” You want the reaction, “Oh my God, I need that! That would make my life so much easier!” This reaction hints that your product could provide actual value to the user.
A good rule-of-thumb: “Cool” ideas fail. “Valuable” ideas succeed.
A warning about this: These reactions can help you in the early conceptual days of the startup, but by the time you are actually developing the product, you must trust people at their wallet and not at their word. Just because people express interest and say they will buy your product, does not mean they actually will. Referring back to Lesson #6, this is why you build an MVP—because you need actual market feedback ASAP!
Lesson 9: Get an Accountant and Attorney
This last advice doesn’t come from me, but from an attorney I met with prior to starting Immersion Arcade. He said, “If you are starting your own business and you really want to do it right, you need to hire an accountant and an attorney as soon as possible. I know they are expensive, but the sooner you bring them in, the better off you will be in the long run."
I posted a thread to /r/Entrepreneur asking for feedback on this advice. I encourage you to read the responses yourself, but the general consensus seems to be it is smart to hire an accountant sooner-than-later, while a lawyer may not be necessary until later (depending on the business).
I also posted this to my personal Facebook page. Here are some responses:
- Doan Winkel: “Before that move, do a ton of customer discovery and prototyping. Make sure you know the problem you’re solving, who you’re solving it for, and what solution they’re willing to pay for. Then think about an accountant and attorney. Do the financial books yourself at first to learn. Let an attorney set up the business entity and deal with employment stuff when you get there.”
- Vince Pinto, co-founder of the award-winning JV Studios: “If you can afford it and you feel you are not keeping up with your books well—yes, it is very valuable to have a CPA. You can manage a lot of your bookkeeping using sites like Quickbooks and learning how to do it yourself first. As far as an attorney, I think it’s always good to have one on-hand… but to have one for everyday use isn’t really necessary. Just make sure you have insurance and don’t cut any corners.”
- Patrick Moore of Trojan Flood and Fire: “I would agree to this…. if you want to make it past the first year.”
Other responses:
- “As an accountant I can say depending on the business, it could be a great idea to hire an attorney and an accountant right away. Some businesses really don’t need it, but having professionals run through things with you can be very helpful.”
- “Employment law is very important so having a legal advisor wouldn’t hurt. I’m not an entrepreneur, but know the HR biz.”
- “‘Need’… maybe not. But it definitely doesn’t hurt.”
- “I’ve never needed one and have owned a few very successful businesses… It all depends on the nature and size of your business…”
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