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How Serial Entrepreneurs Avoid Risks

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Many collaborative entrepreneurs wonder if there is a silver bullet that would help them get their company to work right now.

And there is a truth that every serial entrepreneur knows. There is a way to “succeed” systematically, and there is a way to “struggle” systematically.

It’s a mindset difference.

Those who struggle always build a product before making sure people will buy it.

Those who succeed, make sure others really want and buy their new products before they exist.

By selling their product or service before it’s ready, when time comes to build, they know that they’ll create a product or service that people really want.

To see what I mean, these are three examples of this mindset applied to entrepreneurial celebrities in their beginnings:

  • Before creating an airline, Richard Branson got his flight to Puerto Rico cancelled which left him and a few others stranded on an island. He figured he had a problem and went to find a solution. He picked up the phone to find out how much a charter would cost. But instead of paying a whole charter on his own, he divided the price of the charter among the number of passengers and charged them $39 to rebook their seats. He offered the other passengers to pay and they were glad someone took care of it. This pre-sale Branson’s first experience in the airline industry, and the one who led him to create Virgin Airlines.
  • Before building a company, Steve Jobs also  started selling blue boxes that allowed users to get free phone services illegally. First it was a hobby invention by his friend Wozniak. When he realized people were ready to pay for it, he knew he was in business. Then someone tried to rob him at gunpoint (a story for another tab) and he decided to try selling computers, which ended up being another pretty good business for him.
  • Before Starting Paypal, Tesla and Space X, Elon Musk learned how to run a business and pay his rent by hosting epic night-parties. He first rented a house and threw parties that attracted thousands of college students. Once he knew how to make money with his projects and was comfortable with a business, he either sold it or moved on to something harder and more complex.
  • In 2005 before turning Arduino into a company, the Arduino founders created micro-controllers to teach their students programming and prototyping with electronics. When they realized people were asking in droves how to buy it, this is when they realized it was time to turn it into a business.

Can you see what’s going on here?

They all looked for people interested in what they were offering before they had anything to sell or made any significant investment. They avoided any risk.

If you are a budding entrepreneur, you might think that you can skip this step. You know in your gut that everybody wants your idea.

But from my experience, as we mentioned in the previous post, this is an excuse that helps us hide from the fear of being rejected or being stolen by others.

In this previous post you also learned how to come up with a pretty big list of things to sell. In this post we’ll take the idea you want to do most, and validate if it has the potential of becoming a business.

When you validate, you have to do it one idea at a time.

“Perfect” ideas don’t exist.

OpenROV started with a “simple” underwater robot for submarine exploration and have improved it over time to a much more polished and refined Underwater drone.

Open Source  Ecology started with a Brick Press to create building materials. Once they validated people needed it, they went on to develop the rest of the Global Village Construction Set to create a new open and ecological civilization from nothing.

So don’t worry if your idea doesn’t have a 20 year plan to change the world and a huge community behind it.

First things first. You have found a few ideas. Congrats. Not everyone takes the time to lay them down.

Now, if you want to turn them into reality, you must find if people want it enough to pay for your idea.

This is hard and challenging. People might not be interested at first. You’ll have to tweak your idea or accept that it’s not a priority to others around you. You might even have to leave your idea and pick another one you had.

But you will eventually start to see that your idea can help and have an actual impact on others. And this will be incredibly exciting and rewarding.

The community and the 20 year plan will eventually come after that, if this is what you really want you think is necessary.

Don’t worry if you think your ideas aren’t good enough or might be too hard to sell. The real value of this exercise lies in learning how to quickly validate any idea you have.

When you know how to validate any business idea, you’ll never wonder anymore “should I have tried this?”.

One last reminder:

You may successfully validate your idea or not. If not, your main goal here is to keep moving forward with other ideas and repeating the process without spending a lot of money or time on a website, landing page, app or whatever. You really don’t need it. Just go after the low-hanging fruit and go manual without building a website or hiring anyone until forced to do otherwise.

If you already have a business you want to try, let’s stick to this one. If you don’t have any idea, go back to this post and come up with your own list of ideas. The point is to get started.

If you don’t know how much to charge for it, think how much value it brings to the person you want to help, and divide it by 3x or 10x. For example, if you are selling a course, or a product that you know will make the other person 1000€, you can easily sell it for anything between 100€ or 300€.

If you still don’t know how much your product or service is worth, go with 10€. You’ll see what are the reactions from people before and after you deliver your services or product. Their feedback will guide you into increasing or decreasing the price.

But always make sure that your price is always above your costs to build and deliver the product.

Otherwise you’ll be selling a service that will become a black hole of money for you.

How can you validate your idea in 48 hours?

You already have done some great work with your list. Let’s keep up the momentum to find your first customer and see how easy it is to sell your idea and to gather interest.

I/ Help people individually

The best way to start a business is to start helping people individually (even for free).

This will help you see what they are most excited to pay you for.

It doesn’t look very scalable, but it will give you amazing insights. When you start getting too busy helping others, it’s time to start building your platform, website or whatever you are planning, not before.

Hone your skills and craft first and build your customer base one by one at the beginning.

You’ll have the money, knowledge and proof you need to scale once you’ve got enough people interested.

And keep track of the questions that keep coming. This will guide you when making your product or service.

When you get too busy helping people one on one and making things manually is when you can justify building the actual course, book or product…

Some Examples

  • If you wanted to create something like Ifixit, you could go work at a repair café or at a repair shop and see what products people are repairing or what tools they need. Then make repair guides for the products that appear most often, and sell tools that people don’t have and need to take care of their repairs.
  • Before starting Amazon, Jeff Bezos learnt how to keep an actual book shop. Once he knew how to solve logistical problems and how to satisfy his customers, he went on to develop his platform.

II/ Don’t develop an app, website or physical product, do a crappy sketch

Before we start our business, most of us think we need to develop an app or website, and spend money for some reason. I’ve been guilty of spending time and money on websites before validating people wanted them.

I’ve done this with four projects. It has cost me a lot of money and 2 years of working on projects that could have been way more successful if I had actually asked people if they were ready to use them.

So if I can give you an advice it would be: “Don’t do it!”

Don’t invest in anything before you meet your users.

If you want to create a website, app, marketplace, or even a physical product, don’t start by hiring a designer, developer or engineer.

To make sure what you build will be used, all you need is paper and pencil, Google Draw, Powerpoint or a basic paper Mock-up you can make with Balsamiq or Pencil. It’s cheap, quick and extremely effective.

Imagine you wanted to create an OpenDesk-like platform, but instead of customizable furniture, you want to offer customizable garden-gnomes.

Instead of building your app, just draw it on a piece of paper as it would look like.

My OpenGardenGnome marketplace could look something like this:

OpenGardenGnome

THIS IS AS CRAPPY AS SKETCHES GET

Once you get your first low-tech prototypes, show it to others and get their feedback.

If you have a gnome-selling website, ask them if they want to pre-buy a gnome. If you have a subscription website, ask them if they want to pre-book a subscription to the website…

If they do, you can invest your own time and money in it. But not before.

What people want are SOLUTIONS, not another web, app or product. If you can validate that people want your app or your gnome, then you should build it.

If you fail to validate it, that’s great as well. The point is to learn, and move on quickly to the next idea.

Don’t spend more than 48 hours validating an idea. If it takes longer, look for another customer profile that could be interested.

Once you’ve tried with enough people you thought would be interested, adapted your offer to their needs and it seems hard to find early customers, move on. Trying to sell something hard will only get harder with time.

Note: If you are making a marketplace, you wouldn’t be asking your customers to pay for the marketplace, but for an item you are offering on the platform, like a rental at a someone’s place for Airbnb or an hand-made product for Etsy.

But more on this later.

You want an example? Here is one:

Dmitry Dragilev wanted to find out if people wanted a platform that would help them do their PR outreach.

He did a few sketches and hung them up on a whiteboard to show how it would work. This way he could see if they wanted it or not, if they were missing any features, and if they would be serious about buying his service.

Luckily for him, it turned out they wanted it and were willing to pay, so he built it.

Tip: Focus on the root problem your idea solves, and make sure people are ready to pay for it.

III/ DIH (Do It Home)

This technique is specially useful if you are launching a product that requires retail presence.

When you consider opening a physical space like a fablab, a makerspace, a school, a virtual reality cinema or a hardware store, your costs, time and risk are very high. So to prevent this risk, it is better to start validating your business at home.

Your costs are lower, and you can start making a profit, building your customer base and polishing your offering.

When time is ready you will have people ready to open your physical space.

If you want to launch a fablab to offer courses on 3D Printing or CNC Machining you can invite some friends at your place .

You can charge them through Eventbrite or Paypal. If people pay, you got yourself a business. If they don’t you can move on to your next idea.

For Example:
If you want to invite your friends to try your future physical offering, here is a template you can use to send the invitations:

Hey Guys,

I’m going to run a workshop to learn in one hour how to use a 3D printer, so you can start prototyping your next product designs 10 times faster. [EXPLAIN WHAT YOU OFFER, AND WHAT WILL BE THE RESULTS FOR THEM]

7pm at [your place/ coworking space]. It’s going to be pretty nice ? [TELL THEM WHEN AND WHERE IT WILL HAPPEN]

Who’s in?

I will charge 15€ for an hour and your first 3D impressions. [TELL HOW MUCH IT WILL COST]

See you!

[YOUR NAME]

This template also applies If you are going to do a yoga studio, a gym, a restaurant or any other retail businesses.

You just have to tweak the email to fit your idea.

IV/ The Public Billboard Technique

Post your low-tech idea on an Internet billboard like Craigslist, LeBonCoin or whatever billboard website that’s popular in your country. Any section will do: for sale, gigs, community chats or services.

Using this kind of platform is an amazing validation and will save you tons of time and money building a website, buying a domain, and so on…

You want to make an Open Source custom-clothing platform?

Offer to sell some custom costumes on Craigslist and see if people are ready to buy.

I am sure you are looking forward to ordering some costumes

I AM SURE YOU ARE LOOKING FORWARD TO ORDERING SOME

Once you have people willing to pay for your product, but you don’t have any product, you can deliver them yourself or post your own request for tailors in gig billboards to fulfill your orders.

Example:

When Airbnb was beginning they posted their listings in Craigslits, this is how they found their initial customers. To grow the offerings on their platform they also emailed people who were listing their properties on Craigslist.

Here is an email example written by the founders of Airbnb looking for more people to fulfill their orders:

airbnb-craigslist-letter

V/ The Low-tech email technique

If you want to create a marketplace or website, this is the best technique. Instead of developing your platform straight away, just email your friends. Manually connect people via your email list and charge for the connection.

Offer a service, connect people via your email list and charge for the connection.

If they pay you for what you want to offer, then you can consider making it happen.

Imagine you want to create a food delivery marketplace like Deliveroo. You consider making it Open Source and cooperatively owned. But first you need to find out if it will make money to support the people involved.

So you first email 15 of your busiest friends. If they are interested, you tell them to pay you 20€ through Paypal and deliver food on the night they choose.

Then you post on the Craiglist from your region – or Le Bon Coin if you are in France – that you need a caterer. You then pick up the caterers that would be a good fit, just like in the previous method.

This will validate that people want to pay for the service and that people are ready to deliver the service.

First example – Delivery marketplace:

If you wanted to create a food delivery platform you could use this email template to test your idea. You can also tweak this template for many other types of businesses:

“Hello Friends,

I’ve realized I don’t have much time to cook after I get home or am too tired to make a proper dinner. [EXPLAIN THE PROBLEM]

I wanted to invite you, with a select few others, to test a business idea with me. (Lucky you ? ) [EXPLAIN WHAT YOU THINK OF DOING ABOUT IT]

Convenient quality restaurant food delivered at your place. 

On [date], for 25€ I’ll be delivering sushi, french food and vegan gastronomy. You could choose any of the three, and I’ll deliver it right to your door for your enjoyment! [EXPLAIN WHAT YOU OFFER]

If this sounds like something interesting to you, you can paypal 25€ to name@inbox.com [ASK FOR THE PAYMENT]

Any feedback is welcome.

Have a great day,

Your Name

PS: Please let me know if you have any preference. I guarantee that the meals will be great.”

Second Example – Oomph:

When Oomph (now Crew) started their own marketplace they wanted to match freelance developers with people looking for freelancers.

But instead of spending time and money developing a complex platform, they just used a Mailchimp newsletter and a Wufoo contact form to get their business started.

When people were looking for developers, they just had to enter their project idea and their budget.

Wufoo's contact form

WUFOO’S PROJECT CONTACT FORM

Then Oomph would send a newsletter with the project to their list of developer friends who could provide solutions.

Mailchimp email to send new projects

MAILCHIMP EMAIL TO SEND NEW PROJECTS

This way they started selling $25,000 of projects in 3 months without any complexity, validating people were ready to use their service and pay for it.

If you want to launch your own platform cooperative, don’t build the platform, just set up a contact form to those who want to buy from you, and then add your providers in a Mailchimp newsletter. If there is a match you’ve got a business.

Third Example – Arcade City:

When Uber and Lyft were banned from Austin, Arcade City set up an invite-only Facebook Groupwhere people could request a lift by posting it on their wall, and drivers could match those requests. Potential Drivers could respond with their time of arrival, estimated price and phone to confirm the pickup.

Ride requests on Arcade City's Facebook Group

RIDE REQUESTS ON ARCADE CITY’S FACEBOOK GROUP

This validation helped them get their first 40.000 users and providers, and they’ll be sure it makes sense to invest in developing a platform.

Key Takeaway: Can you match your requests and service providers with a very simple platform at first to validate that there is enough demand and offering?

Wrapping Everything up

We’ve covered a lot of ground in this post. Here is what you should remember:

  • Pick your one idea
  • Pick above a validation technique you think is best for your idea
  • Test it quickly with people in your network who you think would be interested
  • If nobody buys, move on to the next idea
  • If people buy, deliver them your product or service, and invest the money into improving it
  • Help people with your fantastic ideas
  • Rinse and repeat

I understand that the examples I have given above may be different than what you may have in mind.

The point is to share a system that you can adapt to your own ideas so you don’t risk your finances or over-committing to others. I encourage you to try ideas that will help bring more life, openness and transparency to the world.

It might be permaculture products, a sensor, a textile, a book, a new software or anything else you came up with.

Whatever it is, validating will ensure that your creation is a win-win for yourself and for those around you. For yourself because you can make a living, and for those around you because they’ll want what you offer so much that they’ll be ready to pay you for it.

____________________________________________________

About the Author

This article was written by Jaime Arredondo, a Spanish and French collaborative entrepreneur of Bold & Open. See more.

Callum Connects

Andrew Schorr, Founder of Grata

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Taking a different route throughout his life, Andrew Schorr ended up in China and started several businesses.

What’s your story?
I moved to China after I graduated from college in 2004. English teaching was the easiest way to get there, so I looked on a map and picked a small town in Hubei, because it looked to be more or less in the middle of China. I was the only foreigner there.

Back then, everything was about the upcoming Olympics in Beijing, so I moved to the capital after my year of teaching. Pretty soon after arriving, I met the co-founder for all three of my companies. We decided to start a company together the first day we met. He has now moved back to the US and builds flight software at SpaceX.

Our first company, an online city guide, was re-purposed into our second company, GuestOps, a web concierge platform. We sold GuestOps to most of the major international hotel brands in China and still operate it. The genesis of our latest company, Grata came from looking at the intersection of hotels and WeChat in 2012, when WeChat was just starting to blow up. Grata expanded from hotels into a live-agent customer service console.

What excites you most about your industry?
Our thesis with Grata has always been that what is happening with WeChat in China is the future of messaging platforms globally, and as an international team building on WeChat, we would be well-placed to capitalize on that trend. It’s taken longer than we expected for the industry (and us, for that matter) to get there, but finally, we’re starting to see messaging as a platform to get better traction in other markets.

What’s your connection to Asia?
I’ve always been a bit of a contrarian. I grew up in Texas, where all my friends studied Spanish in school. I studied German for no reason in particular. I took a similar path in college: Chinese and Japanese seemed like languages that not a lot of people who look like me studied. I was one of only two students in my third-year Chinese class.

Concur conference in San Francisco, Calif., Wednesday, Oct. 2, 2013. (Photo by Paul Sakuma, Paul Sakuma Photography) www.paulsakuma.com

Favourite city in Asia for business and why?
Shanghai. I should live there, but Beijing has been home for so long. I take the night train down to Shanghai every two-three weeks to meet with clients. Domestic flights are way too unreliable here.

What’s the best piece of advice you ever received?
Don’t plan too far ahead; otherwise, you plan yourself out of good opportunities.

Who inspires you?
Has anyone said “Elon Musk” yet? Barack Obama would be another.

What have you just learnt recently that blew you away?
The gravitational waves recently detected from neutron stars colliding, were so subtle as to only affect the distance from earth to our closest star, Alpha Centauri (4.24 light years away) by the width of a human hair. Perhaps in another life or in the future, I’ll be an astronomer, but a telescope doesn’t do me much good in Beijing.

If you had your time again, what would you do differently?
When I give advice to students looking to get into entrepreneurship, I advise them to work for a post-Series A startup first and learn from a company that’s already doing things well. I learnt everything on my own, which is slower and you pay for your own education. If you work for a startup that’s small in the beginning, you risk learning bad habits.

How do you unwind?
I Hash! The Hash is a drinking club with a running problem. The Hash attracts good people from all walks of life and doesn’t take itself too seriously. It’s a great way to meet fun-loving people all over the world. It’s also how I met my co-founder, our first lawyer, and my girlfriend.

Favourite Asian destination for relaxation? Why?
Pulau Perhentian, Malaysia. A fantastic beach and where I first learned to scuba dive.

Everyone in business should read this book:
For business in China, Tim Clissold’s, Mr. China.

Shameless plug for your business:
Grata does WeChat contact centers for many top-tier brands in luxury retail, travel, financial services and hospitality. We started developing on WeChat before they even had an open platform. Grata provides the most value for large enterprises with complex routing and content demands for their contact centers.

How can people connect with you?
Check out www.grata.co or email me: [email protected]

Twitter handle?
My personal handle is @andrew_schorr and we tweet about messaging from the company handle @grata_co.

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Benjamin Kwan, Co-Founder of TravelClef

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Making music to create a life for his family, Benjamin Kwan, started an online tuition portal and his music business grew from there.

What’s your story?
I am Benjamin and I’m the Co-Founder of TravelClef Group Pte Ltd, a travelling music school that conducts music classes in companies as well as team building with music programmes. We also run an online educational platform which matches private students to freelance music teachers. We also manufacture our own instruments. I started this company in 2011 when I was still a freshman at NUS, majoring in Mechanical Engineering.

I was born to a lower income family, my father drove a taxi and was the sole breadwinner to a family of 7. I have always dreamed of becoming rich so that I could lessen the burden placed on my father and give my family a good life.

After working really hard in my first semester at NUS, my results didn’t reflect the hard work and effort I put in. At the same time, I was left with just $42 in my bank account and it suddenly dawned on me that if I were to graduate with mediocre results, I would probably end up with a mediocre salary as well. I knew I had to do something to gain control of my future.

During that summer break, I read a book “Internet Riches” by Scott Fox and I knew that the only way I could ever start my own business with my last $42 would be to start an online business. That was how our online tuition portal started and after taking 4 days to learn Photoshop and website building on my own, I started the business.

What excites you most about your industry?
Music itself is a constant form of excitement to me as I have always been an avid lover of music. As one of the world’s first travelling music schools, we are always very eager and excited to find innovative ways to a very traditional business model of a music teaching.

What’s your connection to Asia?
I was born and raised in Singapore and I love the fact that despite our diversity in culture, there’s always a common language that we share, music.

Favourite city in Asia for business and why?
Hands down, SINGAPORE! Although we are currently in talks to expand to other regions within Asia, Singapore is the best place for business. I have had friends asking me if they should consider venturing into entrepreneurship in Singapore, my answer is always a big fat YES! There’s a low barrier of entry, and most importantly, the government is very supportive of entrepreneurship.

What’s the best piece of advice you ever received?
I have been blessed by many people and mentors who constantly give me great advice but right now, I would say the best piece of advice that I received would be from Dr Patrick Liew who said, “Work on the business, not in it.” This advice is constantly ringing in my head as I work towards scaling the business.

Who inspires you?
My dad. My dad has always been my inspiration in life, for the amount of sacrifices that he has made for the family and the love he has for us. He was the umbrella for all the storms that my family faced and we were always safe in his shelter. Although my dad passed away after a brief fight with colorectal cancer, the lessons that he imparted to me were very valuable as I build my own family and business.

What have you just learnt recently that blew you away?
You can not buy time, but you can spend money to save time! With this realisation, I was willing to allow myself to spend some money, in order to save more time. Like taking Grab/Uber to shuttle around instead of spending time travelling on public transport. While I spend more money on travelling, I save a lot more time! This doesn’t mean that I spend lavishly and extravagantly, I am still generally prudent with my money.

If you had your time again, what would you do differently?
I would have taken more time to spend with my family and especially my father. While it is important to focus our time to build our businesses, we should always try our best to allocate family time. Because as an entrepreneur, there is no such thing as “after I finish my work,” because our work is never finished. If our work finishes, the business is also finished. But our time with our family is always limited and no matter how much money and how many successes we achieve, we can never use it to trade back the time we have with our family.

How do you unwind?
I am a very simple man. I enjoy TV time with my wife and a simple dinner with my family and friends.

Favourite Asian destination for relaxation? Why?
Batam, it’s close to Singapore and there’s really nothing much to do except for massages and a relaxing resort life. If I travel to other countries for shopping or sightseeing, I am constantly thinking of business and how I can possibly expand to the country I am visiting. But while relaxing at the beach or at a massage, I tend to allow myself to drift into emptiness and just clear my mind of any thoughts.

Everyone in business should read this book:
Work The System, by Sam Carpenter. This book teaches entrepreneurs the importance of creating systems and how to leverage on systems to improve productivity and create more time.

Shameless plug for your business:
If you are looking for a team building programme that your colleagues will enjoy and your bosses will be happy with, you have to consider our programmes at TravelClef! While our programmes are guaranteed fun and engaging, it is also equipped with many team building deliverables and organizational skills.

How can people connect with you?
My email is [email protected] and I am very active on Facebook as well!
https://www.facebook.com/benjamin.christian.kwan

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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