This is the third article in a series of articles from entrepreneurs that have been through Incubate, the University of Sydney Incubator program. Alex Stamp launched Cloudherd.com along with Mike Titchen and Luke Fries in 2012 as the first group of businesses in the Incubate program. Cloudherd is trying to solve the problems that farmers face when trying to sell their cattle, it’s a very inefficient market that seems to be stuck in the 1900s and Cloudherd is trying to drag it into 2013 with an online Auction system and cattle inventory application. The first article is here Launching Cloudherd.com and the second article is here Start-up execution @Cloudherd.com
So the third article in this series slipped. I suppose that as a hard charging, networking, all-singing, all-dancing entrepreneur it is a bit hard to finish three long form articles in three weeks.
I’ve also been having chronic laptop overheating problems with the recent warmer weather, so much so that I couldn’t even watch YouTube the other day unless I wanted my computer to turn into a kettle. The reality was that although I may have had the spare hour or two I would have needed to get this article out, I just didn’t. I’ll try to make up for that.
To round off my series of articles, which some have described as “bad”, “confronting” or somewhat favorably as “a sledgehammer of honesty to the face”, I thought I would talk about what not to do.
Lots of entrepreneurial articles essentially consist of generic buzzwords and lists and end up being “The four things about big data you have to know” or some equally banal piece of outsourced tripe. My list is better, maybe, since I wrote it myself and there are substantially more than four points, though some of them may be elegant ways of restating what I said in previous articles.
Investors are always obsessed with the team, here is what not to do,
- No one loves your idea as much as you. If the idea is kind of your baby then don’t necessarily expect your other founders to work as hard as you or be as passionate about the business as you. They may not necessarily care about organic dog food, or whatever it is you are doing, but they’ve still agreed to work for no money and the Russian roulette of compensation known as equity. Respect that.
- Glossing over tech issues. I see a fair number of young founders doing this particularly grievous sin. They get one guy on the team to learn PHP and they then brand him as the tech guy and gloss over all technical issues. You will get found out if you do this and it is embarrassing, admit what you don’t know and at least try to start your tech guys off from some tangentially related field, like embedded systems.
- Your history probably doesn’t count. Don’t think that anyone will think you are a red-hot startup founder just because you did an internship at PwC, Deloitte or Random Professional Corporation #528. Everyone knows that your job was close to that of a monkey’s, except monkeys cost more to feed and house. If you weren’t a monkey then don’t expect anyone to believe that, you unfortunately have to prove yourself when you are a young entrepreneur.
- Create a learning team. Your team’s skill base will affect how long it takes you to execute a given set of tasks but in the end what will determine the most valuable members of your team is how much they are willing to learn. Always be learning, and not selling. If you’re selling, you’re not learning anything about your customer, investor or partner. Socratic dialogue can be very powerful.
I’m also assuming that most of my audience is people thinking about starting a tech start-up, not organic dog food, and as such I’d like to also present some points about the small amount of technology implementation that I know and participate in.
- Patents.Don’t say your technology is patentable as you are lying in an obtuse manner. Anything is patentable in the US, including Amazon’s stupid one click shopping cart, put enough claims in and you can probably get a patent. If you invented cold fusion, or a way to stop cows from emitting methane, then maybe you can patent it but it will end up costing you a lot of money to protect it.
- Algorithms. Stop running around like a parrot who has drunk a coffee, clucking about how your advanced analysis and algorithms will give you an unassailable competitive advantage. Not only do your competitors likely have the same data, if not more, they also have smart people working for them who can probably reverse engineer your algorithm or features. Furthermore your advanced algorithms which are likely to be slightly more complex versions of existing common algorithms,so you should use standard deviation to figure out outliers and then throw them out. I know a civil engineer who just wrote a GPS tracking algorithm to get rid of junk data; if he can do it, so can your competitors. All of which begs an interesting question, why do so many people use all the same statistical models?
- No one will understand for a long time. If your technology is actually valuable no one outside the industry, nay maybe even a few people inside that industry, will actually understand what you are doing and how you are doing it. Expect lots of blank looks as you tell people about the complexities of serving genetic data from databases and that being why you had to partner with another company. Most people will never even bother to learn about this stuff even if you tell them about it.
I’ll finish on investors, as most startup founders will talk to them many hundreds of times during their lives. Investors give you fuel to burn and can bring a lot to the table; that said there are lots of things that you shouldn’t do:
- Don’t spend too much time talking to investors. Outside of certain investor markets capital availability can be very poor and as such you should spend a lot more time executing than you should trying to hustle investors. If you can get a few paying users then you will be in a lot stronger position to talk to them; not that that is easy. Without any seed funding it can be extremely difficult to launch to certain markets.
- Trust & Alignment. Don’t necessarily trust investors that don’t make their living from the startup scene. They won’t think twice about screwing you because their reputation isn’t their way of putting food on the table. Break out the NDA. (ed not sure I agree with this one, it just depends on the individual)
- Persistence. Don’t think that investors will understand or even be interested in your idea based off one pitch session. There can be a lot of brutal, hour-long discussions about the ins and outs of the business on a microscopic level which will leave you exhausted before they even think about term sheets. That first pitch might even be a disaster, but don’t write things off as you might still have a chance to impress.
- Do your own due diligence. Don’t be afraid to look into potential investors, you might be surprised what you find…..
Anyway, thank you for reading through my series of articles and I hope you found them amusing and useful. Though at times I may seem harsh I just wish to dispense with this American entrepreneur style of things that seems to affect some young entrepreneurs; they think that they will pump out a few weeks of code and then get funded to the tune of several million dollars.
This is not likely to happen in Australia and I encourage those thinking of starting a business to be realistic about what they hope to achieve. If you would like some more advice there may be a few more articles in future, and I’m always available to help if you connect with me on LinkedIn http://au.linkedin.com/pub/alexander-stamp/44/582/917/