After leaving Tokobagus in 2012 I’m basically back to square one where I want to start new companies myself and invest in young promising startups. Around me there seems to be the expectation that whatever I will do it will become successful, just because I’ve had my share of success with Tokobagus. Obviously things are a bit more favorable for me than 7 years ago, but also for me goes Wall Street’s favorite disclaimer:
Past Performance is No Guarantee of Future Results
I think I mentioned it before, a large part of success is luck. I’ve seen a lot of once successful entrepreneurs loose a lot if not all their money because they actually started to believe that everything they touch turns into gold. My resolutions is to not fall into the trap of overestimating myself so I’m binding myself to some basic startup “rules”.
#1 Make Money
An open door for entrepreneurs in offline industries but often a forgotten principle in the online industry. In 2012 I’ve witnessed so many pitches of companies aiming to generate a large user-base for their platform and forgetting to think about how they’re gonna monetize. When asked 99% of the times the advertising card is played, advertising will bring in the big bucks. Well, I’ve been pretty clear in the past about how I think about advertising as a business model for your online platform.
From experience I know how much traffic is needed to make enough from advertising to pay the rent, staff, taxes and still be profitable. On top of that we see traffic in high pace shifting from desktop to mobile. If there’s no shortage of one thing in the world then it must be unsold inventory on mobile. In case you do manage to sell a large chunk of your mobile inventory you’re facing an average CPM which is around 1/6th of what it is on desktop.
So for me it’s back to basics of business. Business is about making money and making money is selling something. I don’t feel the need of being in the spotlights again for having a gazillion visitors, I’d rather be unknown but making a shitload of money. So no business with a vague income model, but clear and feasible from the start how money can and will be made.
#2 Rather A Red Ocean Than A Dry Ocean
The ideas for new businesses seems to get crazier everyday. Somehow aspiring entrepreneurs think they have to come up with a completely-original-never-been-done-before-it-doesnt-matter-how-crazy idea which often leads to ridiculous ideas with no chance of succeeding. Tokobagus wasn’t the first classified in Indonesia, Google wasn’t the first search engine, Facebook wasn’t the first social media, Apple wasn’t the first to manufacture PC’s and Amazon wasn’t the first online shop. Sure, Apple was an early mover but I don’t think that’s the reason for their success. All of the mentioned companies owe their success to either innovating an existing business model or just executing better than the competition.
Now I’m not trying to encourage you to start competing with Facebook or Google, these are monopoly or slightly oligopoly markets. My point is that there’s nothing wrong to do something that has been done before. Nothing wrong with entering a big but crowded and highly competative market. If you can stand out, if you can somehow differentiate yourself from others, if you can execute better then by all means do so.
Whatever you’re going to do, if there’s money to be made there will be competition, also if you’re first mover. So better choose a market in which you’re sure money can be made and a small market share is already enough to become profitable.
Crazy, weird ideas are great but only if you can afford to do them or have a 100% believe that you can make it work. My choice for 2013 will be proven business models because startups already come with more than enough other challenges. Better to fish with a lot of people in a pond full of fish than fishing alone in empty waters.
#3 It’s All About The Plan And Execution
In the time when I had a web development company we mainly developed e-commerce platforms for all kinds of businesses. Much to our surprise (we were still naive I guess) we found that many of our clients thought that launching a shop was the goal itself and that customers would automatically come. Because Internet. This was 6 years ago but I still see this a lot. I even see companies who got seriously funded basically
doing nothing doing the wrong things.
This is either due to having no plan at all, a bad or unrealistic plan or not properly executing the plan. A $25.000 marketing budget is not enough to attack Twitter (true story). If you don’t let your target group know you exist chances are they won’t know about you. If you promise next-day-delivery and it ends up being a 2-week delivery chances are your clients won’t re-order.
If you want to make God laugh, tell him about your plans - Woody Allen
Woody Allen was right, plans always turn out different. Nothing wrong with that. In the last years I made a lot of business plans and for each on average at least 10 revisions. But the fact that we know plans change doesn’t mean you can just do without. You need a better plan than your competition and you need to execute better.
Simple rules that in my opinion are the key to success.
#4 Just Do It
In 2012 I’ve seen more wanna-be-entrepreneurs pitching ideas than real entrepreneurs pitching their business. I never have pitched an idea and I’m damn sure I will never do it. But, if there’s anyone out there who wants to invest in ideas give me a call, I’ve got hundreds. The world is full of ideas but just an idea won’t make you an entrepreneur. Ideas are worth zip, nada, nul, nol, zero without execution.
No investor in their right mind is gonna invest in an idea of someone who’s starting his first company besides maybe some angel in your family. It needs more than just an idea to raise money. Get things done! If you wanna do something online than build a platform. If you want to do something that does require a lot of money then get something that makes your idea more than just an idea.
One of the pitches I still remember from the last semester in 2012 at the Jakarta Founder Institute had something to do with mobile payments. The product was in advanced state and they already had a deal with one of the bigger Telco’s in Indonesia. Setting up this business required money but they understood that that’s no excuse to just sit around and wait for funding. These guys understood that an idea is just an idea and did everything they could with the means they had to make it more than just an idea.
Somehow young aspiring entrepreneurs in Indonesia (and probably elsewhere as well) think it takes just an idea or a half finished mobile app to wheel in a huge investment while keeping majority of a company that’s being fully paid for by the investor. Wake up! Get real! Just do it. Try to become bootstrapped, you might not even need funding. In case you do need funding, the further your ideas or company have progressed the better the deal you get will be.
#5 Know Your Limitations
I learned this the hard way by falling flat on my face. When I was young I knew very little but thought I knew it all.
The good thing about this is that it defines someone as being stubborn and entrepreneurs have to be a bit stubborn. Especially when you’re just starting people will be negative around you and warning you for all the dangers or saying it can’t be done. If you’re not stubborn you might let the negativity affect you.
The bad thing about being stubborn would be not at least listening to others who might have some knowledge or experience of which you can benefit. I’m working on two investments/startups related to travel and fashion. Though I think I know a bit about business, I must be honest and realize I don’t know squad about travel or fashion. I love new challenges so this won’t stop me but I realize I need to educate myself really fast on both to increase my chances on success.
So I do research online, visit events, meet with people in the travel and fashion industry and listen to they’re ideas, opinions and experiences. This helps me understand the market and its traps better.
Besides that, getting the right skills in your team is more important than mastering all those skills yourself.
Anyway, my point is that you should know your weakness and strength and make sure your weakness is compensated in some way so it won’t become your downfall.