In order of priority, the 3 critical factors that will have a big influence on the success of a start-up are:
You’re about to make a decision about funding but before you do, does your start-up have…
1. People who are passionate about their market place
People who live and breathe the jargon – but who can also speak English when required. People who understand what matters in that market place and know – just instinctively know it – how to develop products and services for that sector.
The sector might be fashion – but for large sizes or for kids or metrosexual men or the working woman, or the digital sector, or tech or energy or medicine etc… No matter, is there someone on the team who can predict the future – albeit for a tiny microcosm? If not, then you need to think again.
We call people with these abilities product people or inventors.
2. People who get the commercial realities.
These people understand – and are not jealous of – the investor and know how to implement.
People who can lead and embrace the new people who will be needed to take the business (yes, business, not the product/ service) forward. These people need to demonstrate an understanding of profit and loss, know how to manage a very lean budget and someone who loves success and hates waste.
These people also need to connect with the inventor or creator. They need to be deep in the same market place – but with a commercial perspective. And they need to be able to plug in and unplug various marketing and sales opportunities that the business can generate.
In many ways, they are the glue between the first set of product people and the last set of people. Let’s call these the ‘business people’.
These ‘business people’ can be costly to employ full-time – but they can provide all manner of skills and leadership if needed. Often the start-up entrepreneur can provide some of these skills, but mostly, this area is where the gaps will lie…
… these gaps can easily be filled at a comparatively low-cost to the business by marketing, sales, digital and creative freelancers!
Lastly the business will need…
3. People who provide the cash – but sometimes the boot and if friends and family funding is exhausted and the banks won’t lend, that’s often where business angels come in.
But, business angels don’t want to see profits simply for the money to be reinvested to grow the business empire of the business manager. Instead they want dividends paid to shareholders and / or the opportunity to sell their stake at a x10 profit.
They will care deeply about how much the business people want to pay themselves and then, they will question re-investment of their dividends. ‘Why will money in the business give me a better return than money in my bank account’, they will ask?
Yes, the natural interest of these people will include making introductions, giving feedback and sharing advice. But they are not there to do the heavy lifting. More often than not what they do offer is invaluable experience when it comes to selling companies.
Let’s call these the ‘money people’. Business angels are likely to be more involved on a day-to-day basis – professional investors less so – but this is not always the case and really depends on the investor’s approach.
So, to sum it up…
Ideally to be successful, a start-up needs product people or inventors, business people and money people if it is going to raise funds and persuade investors to part with their cash further down the line.
Sometimes one individual can meet all three roles – inventor – business – money – but if so, he or she will be smart enough to hire in expertise in all three areas – no doubt, on a freelance basis.
So, it is not a given that the entrepreneur needs to share equity – he or she can buy in missing skills as and when needed and borrow money from a personal account or possibly a bank.
But, in each and every case, the successful entrepreneur will need to hire in these skills to grow the business. If not, the business will never become more than a pipe dream or remain a one person consultancy.
Tags: business angels, business people, creative teams, digital, digital sector, energy, entrepreneur, equity, freelancers, medicine, PR, professional investors, sales opportunities, start-up, start-up entrepreneur, tech