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Nick Seguin

Nick Seguin

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Kauffman's Guide To Navigating The Startup Game

Posted: 03/25/11 01:01 PM ET

Starting a company, like capitalism, is messy. If there were a known formula for success, there would be far more startups and far more successful large businesses. Anecdotal evidence and case studies based on past successes do little to illustrate important decisions and the real process of business building. Rose-colored glasses tend to be the eyewear of choice for entrepreneurs looking back on how they won in startup game. At Kauffman, we are examining the "science of startups": the decisions and best practices that are most common to successful, scalable firms.

Now, more than ever, we need entrepreneurs and their firms to succeed because young firms create jobs and drive economic growth. And they tend to be the ones that bring products, services and processes to people at massive scale, generating substantial social benefit and often improving and saving lives.

So how does one go about navigating the various ways to spend time, money and energy on an idea in order to create an immediate positive impact and long-term value? Resources have exploded onto the scene as of late, creating a veritable industry around entrepreneurship. The exact combination and sequence of resources that make up a successful startup are not yet well known, but the following are a few tips that many entrepreneurs have followed.

Not to state the obvious, but human capital is critical. Most ideas are commodities. What really matters are the people who build businesses around ideas. Whether through unstructured peer-communities or focused mentorship, human capital consolidation and curation is a fundamental investment founders need to make when launching and growing their companies.

Human capital creation occurs in formal and informal communities that exist online and offline. Examples include Entrepreneurs' Organization (EO), Hackers & Founders and simple meetups. Likewise, people might be accessed and employed through structured programs such as accelerators, like TechStars and YCombinator, which facilitate direct mentorship. Considerations of a startup's life-cycle phase and specific needs dictate the appropriate engagements here.

Discussions about financial capital always require considerations of industry and phase. For instance, life sciences and advanced materials have their own realities; capital here looks more like $50 million tranches.

Equity financing has consequences that founders must be aware of. Strategic capital, when it is needed, can be the right decision and building a war chest isn't a bad thing. But it is important to be aware of different types of investors, their motivations and their fiduciary responsibilities (if any). When considering and pursuing capital, founders can access helpful content and tools on Venture Hacks, AngelList, Own Your Venture and the Kauffman Foundation's own Entrepreneurship.org.

Iteration is a concept that expands beyond product development. It applies to many facets of a company, including idea discovery, business model search, the team, customer development and even to the personal exploration of becoming a founder. Finding mechanisms, methodologies and opportunities to iterate is important. But you can't iterate until you've done something. That's the first step. Committing to iteration means there is a line in the sand, and this is the most difficult step for many entrepreneurs. Iteration allows for progress on something tangible as opposed to postulation. Look for opportunities to iterate through simulations and events like Startup Weekend, pitch competitions, accelerators, and most important, your own company.

Entrepreneurship is the phenomenon that allows individuals to bring innovations to society, create wealth and realize economic independence. Founders and potential founders have more resources available than ever before as they make their journey toward these outcomes. While the active and messy life-cycle of company building is far from being boiled "down to a science," entrepreneurs will be a step ahead if they focus on people, strategic financing and iteration.

 

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