9 Startup Myths Part 1 of 3

For the next three days, I’ll be talking about 3 assumptions I discovered were completely wrong as I went through the startup process:

1) You need a ton of money to start

Back in 2005, we were rejected by 2-3 investors before we said, “The heck with it, let’s just pool our own money and start.” My initial cash-out as an owner was P30,000.00. Far cry from the hundreds of thousands we thought we needed. It turns out it was enough.

Nowadays, you could start firms with even less, as the cost barriers continue to fall.

Last Thursday, I had a productive brainstorming session with an old friend of mine who was in the printing/publishing business. I suggested, “Why don’t you try building a 2.0 version of your current business on the net?” He told me he thought it would take around P2-3 million to do a web startup.

I told him I could connect him to tech people so he can knock zeroes out of his initial investment assumption.

Web startups are the most cost-effective startup type of them all. If you can program, you can build an e-commerce website for less than a pittance and start a business. You don’t know how to program? Sell your startup idea to someone who does and offer her substantial equity. She can instead work on the website for the equity instead of you paying a salary or a fee.

A great entrepreneur will ALWAYS find a way to get things done without a huge initial investment.

2) You will be your own boss

This was one of the first myths I discovered just wasn’t true.

When Pao and I started, we immediately made business cards which said “CEO” and “COO.” Yeah, we just loved the sound of that!

The moment we worked with clients though, it became very apparent who the real boss was. Needing to prove ourselves and earn trust in the market, we needed to over-deliver every time with every new client. That usually meant being under the beck and call of each client who chose to work with us. They were the real bosses and dictated everything.

Oh, you want this 4 month project crammed into a month?

Sure, no problem!

Oh, so you want me to do this 20-slide presentation which isn’t in the contract we signed? For free?

Sure, no problem!

Even the titles themselves worked against us. Once, Pao was in a presentation with a bank executive,  to whom he gave his “COO” biz card. Upon looking at the card, the client smiled and replied, “Oh, COO ka pala eh, ibaba mo naman young presyo.”

From then on, we just changed our titles to “Consultant.”

3) My corporate life would prepare me for startup life

When we were starting, I thought my 10-year corporate experience would help me run things in STORM.

Wrong.

There is nothing in my corporate career that could have prepared me for life in a startup.

Here’s the big difference: in corporations, unless you are the CEO, you think only as far as your function is concerned.

Going up the corporate ladder in human resources, I only thought as far as HR was concerned. Yes, I was trained to be a “strategic business partner” and know the business better – but I never made decisions for anything beyond my departmental role, and I would always look at things through the lens of my function.

In a startup, you learn veryveryvery quickly how and why every decision affects every other business function. Since resources are extra-scarce in new startups, you are forced to make (quick) decisions considering ALL the affected functions. Nothing in isolation.

Let’s say you want to implement a particular marketing plan. You then make an analysis that you would need someone full-time on it for 3 months. You could do it yourself, but then who would do current consulting work you are doing for a current client? Let’s say you consider hiring a person instead, what would that person do after the 3 months are up? What sort of person will you need? Do you have enough money to afford her? Who would train her? What happens if she’s successful and lands projects within the first month? Who would do the account management for these new clients?

Corporations train us to do work on a per-department basis. Sure, you have your management trainee programs – but each of these trainees is ultimately assigned to a home department after their tour of duty.

Startup work demands immediate holistic, systemic thinking. A corporation trains us in a singular function, because this is the most efficient way to structure things (like an assembly line).

This is why I’ve always said to friends that in a single year in a startup, I learned more about business than a decade in corporate.

Three more myths busted in part 2!

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