The Chicago startup "scene" has reached orbit from when I first started following/participating about three plus years ago. It has taken off for sure, however, there is a bit of a "scene" about it that concerns me. There is a bit of percieved sexyness to startups that everyone wants to jump on board with and for some (less experienced on the process) it resembles the flipping of real estate. Hey, start a business and sell it to a third party in a short period of time for a nice profit. Sound familar? Sounds like the year 2001 to me.
What fuels this are some of the methodologies about how to start and launch your idea. Great methodologies like lean start up and so forth, say "just do it". Just go out and build it, and make mistakes and get something launched. I get it and I think that thought process has to be sprinkled in to a solid idea, addressing a real problem, for a specific customer - at the right time. Digital startups are judged immediately as soon as you type in the URL. Launching and then tweaking or pivoting runs the risk of potential customers writing you off too soon. If you pivot really early on in your development, then you probably did not have the target customer and problem clearly defined to begin with. You just had a cool idea - that no one really was willing to buy.
So let's say you do get it right and people do want to buy your company. How early do you sell? I guess it boils down to why you started this thing to begin with. I always preach to entrepreneurs - don't start a business unless you are absolutely passionate about it. People who flip houses are not passionate about the property they buy and intend to sell in 3-6 months. Not as passionate as they are about their own home. That lack of passion, produces short cuts and short time horizons. When the going gets tough, they get going and abandon their effort.
When I started my first company in 1995, I did so because I found the right idea at the right time and I had wanted to have my own business since my high school days. What drove me to bootstrap and work nine months starting that business while working a regular day job was my desire to make it a reality. To make it viable. To create it and have it survive. Selling that business in a short time frame was never in my mind. Although, I did have an exit strategy clearly in mind - based on the opportunity present. I "saw" why my business would be valuable to others - at some point.
After year two or three I was doing three million in revenue. No debt, no outside funding. I provided the seed money (all in - around $30k). At that time I was introduced to one of Chicago's billionaires (no, not a name you are thinking of) who over the course of a couple meetings offered to invest $5M in our business. I turned it down. I could grow my business on my own. And I could work on my own as a result. Did I just screw up?
So now I have another new business. Again, one that I believe in and wish to see grow, thrive and survive. After 12 months of development, beta users, customer interviews we launched Dec 3rd. The product is great! Customers/prospects who see it quickly state how we hit the gap they have - validation. We even have talk about exits and acquisitions - with our customers! They are asking us our plans because they see a value in our solution. Yes, I need to make them customers first! But it's validating and showing we are on the right path because we took the time to build it right and to release it when it was right.
I am going for funding for this business - which I am not happy about. I'd much rather bootstrap. Why, you say? Isn't the startup path, have an idea, get funding and grow like crazy? Well not for everyone - in fact, very few go that path - and very few should go that path. We need funding because we have a perishable opportunity to be a market leader with a unique IP that our target customer base desperately needs now. To take advantage of that opportunity we need resources to scale rapidly and then implement our next phase which is even bigger. So we'll be giving up control and equity to the right investment partner so we can do just that.
And we'll have an exit (several infact) strategy in mind for our investors. However, I and my team want to see it through. An early sell out would be devastating to me as an entrepreneur. I've worked 12+ months crafting something that I know will be huge and that addresses a huge problem. I've experienced the indescrible joy and satisfaction of growing soemthing from nothing into a viable and then thriving business that customers love. And I want to do it again. Revenue validates your efforts and then continues to fuel your passion, effort and desire.
A proper start up is a gift. Very few ideas are acted on. Very few acted on ideas launch. Very few business that launch survive to be successful. Don't sell too early if the opportunity presents itself. You'll live forever wondering what could have been. And worse yet, you will live with the question of did I sell too early. I can tell you there is so much more down the road - not to mention your valuation growing. Most entrepreneurs sell early or sell period because they are tired - burned out. Recognize the difference.
To close my story, I did sell my first company mentioned earlier. Every year was a growth year over the next and it achieved a spot on the INC 500 list twice. I ended up selling to that original billionaire's company about eight years later - almost on the anniversary date of our founding. We did pivot, but after a few years in business. That pivot was based on customer feedback and experience in our market. That pivot transformed our business and was the reason why we were acquired. Had I took investor money in the begining, I am willing to bet we never would have become the company we did on our own. Our revenue may have been bigger, but we may not have been as innovative and unique as we were.
There's always a chance to sell something once you've created it. There are not as many chances to actually create something that becomes a reality. Take time to recognize what you have if you are lucky enough to get to that point.
