Over the years, I’ve had the privilege of speaking to numerous people from all walks of life about entrepreneurship and startups in general.
But perhaps the most striking disconnect was those who were the aspiring individuals who may have heard about startups and entrepreneurship – but have not yet made the transition to doing one themselves.
Within this group, it quickly became apparent that many had a misunderstood view of entrepreneurs and startups – which is more of a reflection on how entrepreneurship is marketed in the media today than based on actual reality.
From my experience here are the top eight misconceptions I’ve noticed that exists with aspiring entrepreneurs and non-entrepreneurs alike.
Misconception #1 – It’s all about the idea
This statement is probably the most common misconception. I’ve had countless people say to me they had this multi-million dollar idea that they would agree to share with me.
The only caveat was – if I liked the idea and decided to build it, I’d give them half of the equity in that new venture. Little did they understand, the success is hardly ever in the idea but more so in the execution of that idea in the real world.
“… success is hardly ever in the idea but more so in the execution of that idea in the real world.”
It is rare for a company to create a business out of a completely unheard of idea. Take Google as an example. Web searches already existed before they started their company – Yahoo owned the majority of the search engine market at the time. Social media already existed before Facebook entered the scene – does anyone remember Friendster and Myspace?
The commonality you will find is that the above companies took an existing idea but delivered a far superior solution. The importance is not in the idea, but more-so in the continual execution and iteration of improvements based on customers needs and feedback.
Misconception #2 – Startups are easy
If you want something that is easy and gives you more free time, embarking on a startup may not be the best idea. Startups initially require a lot more work to get this off the ground as you are limited in terms of time and money. Furthermore, you may have to compete with products that could be a lot more mature and face competitors who may be more well funded.
You may need to work extremely long hours with little to no pay. Have to balance between doing sales, office support or be a developer until you can afford to fill those positions. Be possibly rejected hundreds of times by customers and investors. Then there may be the constant criticism behind your back that you will never make it or that you have no chance.
But these difficulties should be expected – it is never smooth sailing. Even some of the most well-known companies today had hard times initially. Did you know that in the early days Facebook nearly went bankrupt? Mark Zuckerberg thought about closing down Facebook a few times. Or that Apple almost went bankrupt in 1997 and Microsoft had to bail them out?
Any experienced startup founder will tell you that creating something that offers value is no easy undertaking. Initially, the deck seems all but stacked against you.
Misconception #3 – Your friends and family will support you
Often your closest peers are the wrong people to encourage you to do entrepreneurship. Initially, they may support your decision. But as time goes on and you haven’t made it overnight, they will start to question whether you should start to move on. You need to maintain a firm conviction and belief in yourself – as your peers may not understand what you are doing or cannot relate to why you are doing it. They are always going to compare you to another product or service that’s established and think you are crazy to try.
“… your peers may not understand what you are doing or cannot relate to why you are doing it.”
But this process is expected, you are, after all taking steps to venture out of the norm. But that is the definition of being an entrepreneur – going against what most people consider “normal” – to achieve something you believe you can accomplish despite the odds.
I am sure numerous people would have thought Steve Job was crazy to create Apple – when IBM was already dominating that space for over 50 years. Let me ask you, do you know of anyone who owns an IBM computer today?
While having the support of your family and friends are sometimes taken for granted – do not take it personally if they are not as supportive as you expected or fail to be as passionate about your venture as you are.
Misconception #4 – Your friends are often the best co-founders
While your first instinct may be to find someone within your circle of friends to be your co-founder – take time to evaluate whether they are really a perfect fit for you and your vision.
Does the person compliment your skillsets? Do they have what it takes to encourage you to keep going? Are you prepared to spend that much time with them? Are you able to balance your friendship with work requirements? Do they have the same drive as you? Are they willing to risk as much as you?
If you happen to know someone who ticks all those boxes – then your situation would be more the exception than the rule. While there are many reports of good friends working out as co-founders, there are even more reports of relationships going south and affecting both your business and your friendship.
But generally speaking, most of the friends we know around us may not necessarily be the best fit. Take a step back and think about them on a job level. Would you even work in the same company with this person if given the opportunity? If the thought of being their colleague in a corporate job concerns you – it should ring bells in asking them to start a venture with you.
In my experience with starting businesses with friends in the past, the dynamics of your friendship will change once you introduce a business dimension to it. No longer are you meeting up every few weeks to casually catch up to talk about sports, or go shopping or to a bar. Instead, you may see them every single day, with your conversations mostly revolving around milestones and progress.
It is prudent to choose the right co-founders who will walk with you along the journey. The road to success can sometimes be quite long, and it is rarely easy. If things go pear-shaped as they most often do with startups, are you willing to risk your friendship as well as your venture?
Misconception #5 – Customers will want to use your product or app
There is a saying that innovation is king and that if you “build it, they will come”. However, I found out the hard way how wrong this statement can be.
When I was creating my first big product, I was doing the same thing. Tucked away in an apartment room or garage all day coding away on developing the next big thing. We would keep working on this secret project, careful not to publicise it – so when we did finally unveil it, people would be rushing to use it.
Unfortunately, when we did finally launch, we were expecting a fan fur of downloads, but the results were pretty disappointing. Hardly any downloads or reviews. Furthermore, our customers were not even using the features we slaved away to develop. As a final blow to our efforts, within a few short weeks, our unique features were just copied by our competitors and marketed as their own.
We failed to understand at the time, that while our features were seemingly superior to our competitors – people had particular preferences that we never considered. Subtle differences in the colours or even the logical flow made a real difference to the market in which we were chasing.
Our approach was completely wrong.
We should have gone to market earlier with a leaner set of features we wanted the market to test. Get feedback and then use this as a basis for all future iterations. Let the customers guide the development of the product they would be using instead of coding away trying to determine those unknowns ourselves.
It is wise not to have unrealistic expectations that your product or service will be hugely popular overnight when it does go public – and plan for contingencies accordingly. You would often find building a loyal user base takes time, and it is smart to have a strategy to tackle this from the onset.
Avoid becoming a statistic of the many startups that launch a product only to fail a month later – drowning in debt due to R&D and marketing costs, which they are now unable to recoup.
Misconception #6 – You need to raise money right away
Research and surveys show that investors and venture capital firms only fund a small percentage of the startups it interviews. So for most startups, they will not have this direct access to funds initially.
According to data from Fundable (1) – only 0.91 percent of startups are funded by angel investors, while a measly 0.05 percent are funded by Venture Capital (VC) firms.
“… only 0.91 percent of startups are funded by angel investors, while a measly 0.05 percent are funded by Venture Capital (VC) firms”
However, the good news is that not all startups require the need to raise funding right away. For nearly all my ventures, I have managed to bootstrap initially until a point where it can be moderately self-sufficient. But what exactly is bootstrapping you may say?
Bootstrapping is a technique where you would start a venture with low overheads. Generally, you would use your funds and get the startup to a point where it is self-sufficient.
If executed correctly, bootstrapping will allow you to build a Minimum-Viable-Product (MVP) and test the market to see if you have a real market fit. You may find that you can move faster without the help of an incubator initially – without draining your time on programs and most importantly, with no equity dilution.
But perhaps the best thing of all – under a bootstrapping model if you fail – you only risk failing with a small amount. And more importantly, you learn from your mistakes – so you’ll know how to approach it differently next time.
Misconception #7 – You will have overnight success
Having overnight success is probably one of the biggest misconceptions of them all. That if you create a startup, you will be hugely successful in a short space of time – when this is unfortunately far from the truth for a majority who undertake this journey.
I am sure there are the rare few who have had overnight successes. But from my experience, there is almost always a backstory you do not have full context about. Maybe their parents were already millionaires or knew people in the industry who helped them. Perhaps they already had existing political ties to the product or service. The media likes to showcase the struggling and often starving entrepreneur who makes it big time overnight – but this needs to be taken with a grain of salt.
For all but a few, a startup is hard work and often the seeds you plant initially may not see fruition until many years down the line. It is essential that you focus on what you are passionate about and building something you care about – versus doing something purely for fame or profit. It can be a long journey, and monetary goals are usually not enough to get you to your destination.
Misconception #8 – That pivoting means failing
It is a common statistic that states that 90% of businesses fail in the first few years. But if you look closely, it’s not because they didn’t start – it was because they didn’t persevere. They gave up when they should have pivoted, or they pivoted too early or too late. Sometimes you find they didn’t pivot at all.
In all my businesses, I’ve learnt the hard way that pivoting is an essential part of survival. To understand where the market is going and anticipate this so you can meet that intersection – because that is where the value truly is.
But what exactly is a pivot, you may be asking?
A pivot is essentially a shift in business strategy to test a new approach regarding a startup’s business model or product based on the feedback received. (2)
There is a saying in the startup world whether to “pivot or persevere”. In essence, you need to continually assess the direction of your product or service and question if this is indeed the right approach – or if there is a better approach worth considering.
Sometimes in your startup journey, you may get lucky and find yourself ahead of your targeted market – giving you valuable time to capitalise. However, other times, you may find yourself on the back-foot continually trying to chase the market. It is in this scenario that you need to re-evaluate whether you have the reserves to catch up from behind or if you need to be open to catching another opportunity.
As an example, for one of my earliest products we were riding the growth of daily deal markets. We had penetration and market share into 12 countries and over 6 million deals a year – our platform and innovation were growing; however, something happened.
The deal market started to come over-saturated, and the bubble burst.
The effect of this rippled throughout the industry. Customers interest and investor funds dried up overnight. What was once a booming sector got reduced to no more than a fad. Now when your a budget-conscious startup your not expecting the entire industry to crumble under you – and we were no exception.
We were ready to give up. We had little more than a few dollars in the bank account. Things looked bleak. In a last ditched effort, we decided to use our understanding of the merchant market and pivot to a new area – into digital payments. This eventually opened up opportunities to create software for banks in the FinTech space.
I use to think that when you pivoted, it would be a huge undertaking. Things would be in disarray, and you’d need to restructure your entire business to go in another direction. But now that I’ve been through it, I understand it’s completely different. Pivoting, for us at least, was more like a small rudder on a large ship – which slowly turns the ship around until you look up and notice your heading in a different direction. It was almost a natural path transition for us to take.
And if you are still in doubt, rest assured you are in good company. There have been a vast number of companies who have pivoted that you may not even realise that are now huge successes today. Did you know that
- YouTube started as a video dating site
- Twitter was originally meant to be a podcasting network
- Facebook started as fashmash, a hot or not site
- Flickr started as a game
- Nokia was a manufacturing firm making gas masks and car tires
- Slack also started as a video game
- Nintendo was a playing card company
- Instagram was a location-based check-in app
So next time you hit a wall and consider giving up entirely – take a moment to think of what other applications and areas you can apply what you have already done. You may find pivoting is the natural transition for you to make.
In this article, I’ve shared my experiences on the top 8 misconceptions that seem to exist among aspiring entrepreneurs. My hope is others will use this to better understand and prepare for these in their own journeys. I am always open to conversation, so feel free to reach out to me to chat about anything and everything.
See you on the other side!
– Jeff Chin