Having covered the steps required to turn your business idea into a start-up, and accessing the initial funding available to scale it into reality, I wanted to take some time to provide some comfort for those that don’t make it.
Statistically, one in three start-ups fail in the first year and then 50 per cent of the remainder will fail in the first three. So before you start on this road you need to be sure that you have a good chance of beating these odds and clear stamina to allow yourself a chance of success.
The number one reason listed by Statistic Brain for failure is going into the business for the wrong reason. Now that can be a double edged sword as sometimes we are more engaged by some sectors than others because they interest us, and that can in turn provide a motivational hand. Think of the quote “You will always do better at something you enjoy”. But bright lights alone cannot provide revenue, and if everyone is drilling in the same well the return is likely to be divided and not necessarily sustainable.
Once you have completed your business plan you will have the best chance of self-evaluating your prospect of success. But who can you look to for advice if the business fails to get traction? The chances are more likely that you have put all your available resources into its success, and also your credibility.
In the US there have been a few recent cases where digital start-up entrepreneurs have taken their own lives. Jody Sherman of Ecomom, Aaron Swartz of Reddit, Ilya Zhitomirskiy of Diaspora and Autumn Radtke of First Meta are all sadly no longer with us.
I strongly recommend that would-be or established start-up entrepreneurs seek out mentors. Now, traditionally mentors help provide business advice, especially in areas unfamiliar to the tech start-up. But also consider the value of mentors if the business fails to succeed. Failure is a lonely place for anyone and especially for entrepreneurs since we tend to only make plan As, and need to have a conquer-all attitude to get the job done. A mentor can be a great asset in a successful business but also a good friend for the two thirds of business founders that will inevitably fail.
Then there is the case of the businesses that succeed but without the founders receiving any bounty. Bloodhound Technologies, formed in the mid-1990s, was sold for $82.5m and the three founders only received $36,000 each. There are definitely some leanings here for start-up school.
In the next edition I’m going back to start-up school, well Start-Up Boot Camp, with Smarta.com and as “I return to the light” I will be sure to share some of the latest insights in my next column. Be sure to share this article with any of your friends engaged or engaging into digital start-ups and I look forward, as always, to your commentary.
Phil Cooper is founder and CEO of Kippsy.com