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Should you start your company in 2014?

Bungee-jumping

The month of January usually comes with its set of new resolutions and, for wannabe entrepreneurs, 2014 might be the year when they ditch their jobs and start their own business. But becoming an entrepreneur is a bit like bungee jumping: it looks cool when you sign up but you start asking yourself millions of questions when they tie your feet to the elastic cord.

Since I came across a lot of these questions recently, I summarized below 7 questions wannabe entrepreneurs usually ask themselves before making the jump, with my best answers to them.

1/ Is it a risk to start a new business in 2014?

Absolutely yes but no more than it’s been for the past years! Any search on Google will show you that more than 90% of startups fail. In my opinion, the question you should ask yourself is rather: “what happens if I fail”? The answer to that question is utterly personal; whether you have kids to look after or you are a young computer science engineer who can find a job any time, the answer will be very different.

2/ What is the minimum budget to start?

Thanks to open source software and cloud-based hosting solutions (like Amazon Web Services), you can start your web or mobile startup with only a couple of thousand euros. This is drastically lower than 10 years ago where you had to invest into software licenses (like Microsoft or Oracle), physical servers and hosting space. Of course, if your project is about creating a hardware product, budget will be much higher as you will need to buy electronic components, work with industrial designers and make a few prototypes validate your idea.

 3/ Can I launch a startup alone?

Yes you can but, for example, a business founder starting a technology company alone will not get very far. Hence the current hunt for technical co-founders. If you have a technical background, it really depends on how much you’re willing to take care of the sales and marketing parts of the business. Technical people usually underestimate their ability to take care of sales and marketing. As of managing a company alone, many entrepreneurs have proven that they don’t need partners to run their company and rely only on employees.

4/ Is a failed startup considered a career disaster?

One of my first bosses used to work for Paul Allen, the co-founder of Microsoft. During the job interview, Paul allegedly asked him about his biggest fuck-ups and “if he didn’t have any, he wasn’t a real man”. Of course, we ‘re talking here about a real innovator and entrepreneur, moreover located in an area (Silicon Valley) that value failure. In old Europe (not just France), failure can indeed be viewed negatively but this tends to disappear, especially in IT. Actually, more and more web companies like Google or Facebook even prefer to hire previous startupers as they know for sure they’re selecting entrepreneurial and dynamic people.

 5/ Do I have to raise funds?

My personal view with fund raising is that there are projects that are made for fund-raising and there are people that are made to raise funds and manage other people’s money. Unfortunately, the two conditions are not always met together. In other words, if you’re not planning to do whatever it takes (it usually means sacrificing most of your personal life) to rapidly grow your business and get it acquired within the next 5-10 years, don’t raise funds. If you have the right profile, with the right project (i.e. that fits with 5-10 years exit), go ahead. To get a balanced view on venture capital, I encourage you to watch 37Signals’ Hansson’s speech on the matter.

6/ How can I protect my idea before discussing with potential investors or partners?

Unless you’re working on very advanced, state of the art, science, you shouldn’t have to protect your idea. Since they meet hundreds of entrepreneurs every month, no investor will have the time or the will to sign an NDA. If you’re thinking of patenting your technology, be ready to spend tens of thousands of euros and I’m not even talking about global patents. I would rather encourage you to disclose enough of your idea to engage with people and get quality feedback from them but be cautious enough to recognize a potential competitor. Of course, at the end, idea doesn’t matter much. Execution does.

 7/ When should I ship my product?

As LinkedIn’s founder Reid Hoffman famously put it, “if you’re not embarrassed by the first version of your product, you’ve launched too late”. This applies even more to engineers that always have to develop this very last feature that will make their product appealing. The reality is that most of the times, your feature set doesn’t fit with customers/users’ expectations. So the sooner you launch, the sooner you can get quantitative feedback from your customers and adapt your feature set.

P.S: Thanks to Erwan Guerin for the initial list of questions

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  • Jean-Marc Le Roux

    The
    first paragraph is a bit misleading, since it give the impression that
    the 90% failure rate is something new in 2014. Also, maybe indicating
    this as a failure rate over time chart would encourage people and
    provide them with a “scale of success” as times goes by (providing the company survives).

    Other than that, it’s encouraging and not absolutely pro fund raising. Which is more than refreshing.

    Maybe
    some 2014 specific figures would’ve been welcome though. I don’t which
    one, but the fact I don’t know which figure would be meaningful is maybe
    a good indicator that I would appreciate even more having your input on
    them

    • djarjoura

      I changed the first paragraph so people won’t get confused. As of statistics, I’ll be sharing some more in the next posts but my main point is that ultimately, entrepreneurship is an irrational decision. Whether I show numbers that make entrepreneurship more (or less) accessible today, I believe that true entrepreneurs will still make the jump, driven by passion and/or ambition