school professors have previous
entrepreneurial experience), and
you can meet people through
and conferences. You can also just
email someone you admire. Save
up your questions and ask them all
in a weekly or monthly conversation, so you don’t pester anyone.
And when you do talk, don’t just
talk about the business. This isn’t
a transaction. It’s a relationship.
Numbers are beguilingly concrete.
It’s natural to want stats on markets, pricing, and competitors from
the start. But market data would
not have explained why Red Bull
charged while the “lava lamp” soda
Orbitz succumbed to gravity, or
why Instapot commands twice as
much as Crock Pots at retail. More
important, in the very beginning,
are insights about your own proposed business that you achieve by
stress-testing your assumptions.
The emphasis is on what you can
learn not about your industry, but
rather about your idea.
Randy Komisar is a partner at
venture frm Kleiner Perkins
Caufeld & Byers, and co-author
of Getting to Plan B: Breaking
Through to a Better Business
START WITH THE history. No
matter how disruptive your idea,
precedent exists for it. So once
you’ve identifed your value proposition, go back and look at real
companies that have done something at least roughly similar. You’ll
want to fnd examples that have
been successful. (If none have been
successful, you should seriously
question whether this is something
anyone wants.) Study them and
draw lessons about what worked.
Then, research companies that
tried something similar and failed.
What did they do wrong? How
do you avoid those mistakes?
Next, identify your leaps of
faith: what you don’t know but
assume about the market. These
are things that, if they are wrong,
mean you don’t have a business.
Devise quick, cheap ways to
test those assumptions. Run a
Facebook ad and see how many
responses you get. Go stand in an
aisle at Whole Foods next to a
competitor’s product and question
shoppers about it. What do you
like and not like about this product? What would you do to
improve it? If I ofered you an
improved version for $1 more,
would you buy it?
You will do market research,
but that comes later. Before trying
to fgure out how big your market
is, you need to know that people
have accepted and will continue to
accept the gist of your value proposition. Otherwise, you’ll be piling
assumption on top of assumption.
For most founders, banks and
professional investors are later-if-ever capital sources. In the beginning, it’s you, your family, and
friends. Self- and personal-circle
funding requires you to jump
through fewer hoops than other
sources. But it is almost always
more fraught, and in some ways
the risks are much greater.
Meg Cadoux Hirshberg is the
author of For Better or for Work:
A Survival Guide for Entrepreneurs and Their Families. Her
husband is Gary Hirshberg,
co-founder of Stonyfeld Organic.
IN ALL THE EUPHORIA of a startup, it’s
easy to discount that you’re putting
your family’s fnancial well-being
in jeopardy. People talk about
entrepreneurs starting their businesses with “personal savings.” But
founder, Virgin Group, and
author, Finding My Virginity
When I began, I didn’t know anything
about business. I was excited about
starting Student magazine, and then
we had the idea to use the publication
to sell music, too. I didn’t create a
formal business plan. That seemed
really boring to me. I just thought
about the high cost of records and the
sort of people who bought Student; we
believed we could sell cheap mail-order
records through the magazine. We
made enough money from mail-order
to open a record shop.
In 1971, music retailing in the U.K.
was dominated by WHSmith and
John Menzies, which were both dull
and formal. We decided Virgin Record
shops would be where people could
meet and listen to records together.
We wanted to relate to customers, not
patronize them, and we wanted to be
more afordable than our competition.
Word of mouth spread, and people
came to us rather than the big record
stores. Cheaper records brought in a
food of inquiries and more cash than
we’d ever seen. Virgin Records became
very hip. People would stop by, lie
on beanbags, meet friends, and listen
to the best new music. There was
no better place for a self-respecting
21-year-old to be. We aimed to open
a shop every month in 1972.
We soon realized the industry was
ripe for further disruption. There was
nothing overtly rock ’n’ roll about the
way artists were treated or records
were produced. So we bought a prop-
erty, the Manor, turned it into a record-
ing studio, and launched our Virgin
Records label in 1973. Mike Oldfeld
was our frst artist. His album Tubular
Bells became one of the biggest sellers
of the decade and the soundtrack to
The Exorcist. The Virgin brand and
its global impact today all grew from
those roots. —As told to S.M. P E T E R