Startup Ideas that don’t make the mark
Recently, we have been receiving a lot of applications for the funding commissioned by MDA. There are good and bad ideas. Of course, some of them will be getting “No, I am sorry to inform you that….” from us. it should not mean to you that it is the end of the road if we don’t fund you. If you believe in your idea so much, you should continue the search for funding. Even better, try to do a startup without funding, like some of our resident contributors, Cobalt Paladin, Design Sojourn, Weichang, Der Shing and myself have done. Through a few correspondences and meeting some self-proclaimed and crappy “entrepreneurs”, I have set up a list of reasons why they don’t make the mark. I have also placed some notes in this post to tell people what kind of entries will end up in our rubbish bin. Here are three reasons why we are ready to reject them. (updated 5 Feb 2007)
1. One man show is very likely to fail.
Despite how much we tell everyone that a team is important, some Singaporeans are still doing that. Usually when an entrepreneur tells me that he runs a one man show, three possibilities come to my mind: (i) he cannot inspire people to work with him, (ii) he cannot scale his business and hence his profit margins will be extremely low or (iii) he does not know how to grow his business. Good businesses require tight-knitted small teams and great business demands a vast number of good and strong teams. This is one problem I see with single inventors. If I keep trying to help them and gather people around them and they still do nothing, this demonstrates that they just cannot handle people. If you are still not convinced by my reasoning, here is a story which I can share with you.
Years back when I was in Cambridge, a brilliant German inventor I know approached a friend of mine from the United States to do business development. They formed a startup and I thought that the technology was fantastic to make the next Google. This is what exactly happened. One day, the inventor came to me and asked me about business models in my area of specialisation. I was baffled and told him that I was no expert of his industry. Then he continued to ask me what book to read about this. I told him to look up a few references. In the end, I realized that he did not trust my friend at all about business models. For every subject from financials to writing business plans, he had read every book. However, in the end, the business failed horribly. Luckily, my American friend did not suffer badly from the experience. Within seconds he quit the venture, a well-respected serial entrepreneur (and business angel who have done numerous technology startups and sold them to high bidders) in the Cambridge cluster called him and offered him a CEO job for the new startup. The moral of the story is trust which is cardinal to some of our Asian cultures. Remember, you cannot be the CEO, the accountant, the business development director, the public relations and the inventor all at one time. It’s impossible to work like that.
So, if you want to convince us, show us if you have a team of two at least, where the other person possess complementary skills to what you don’t have.
2. Derivatives vs Imitations
Some companies successfully did it through imitating what a successful big company do. For example, Baidu, the Chinese search engine took wholesale from Google. However, that can work if you can harness a domestic market as big as China, India or Brazil. Some founders try to do this in Singapore and find that their markets are so limited that it amounts nothing at all. As a matter of fact, Baidu is not really an imitation, but a derivative of Google operating in a niche market, namely the customers all write and read the Chinese language.
Of course, if you make a derivative from an existing product, you have a problem. The problem is not just your technology being challenged on the intellectual property front. The real problem is actually the market share that you are getting. Recently, Justin mentioned that if Chad Hurley did YouTube in Singapore, the company would not have flourished because of all the laws and regulations in the country. Actually, he is about half right. The real reason why Chad Hurley can get backers is because he has leverage of the market. Even if all the companies will sue him, the investors in Silicon Valley or the web 2.0 market will not ignore the amount of customers his website has generated. If you want to be in the internet business, you either have the top class technology or have the most customers. You can attack the niche market but be prepared that I will ask, “Are the people buying your product make up the top 20% of the income group in Singapore?”
3. Half hearted Efforts and Risk Adversity
If you want to do something, go all the way for it. If you want to take money from someone, be prepared to subject yourself to control from the investor. If you want to do both, you better go with full efforts. A lot of people talks about their ideas, but I have seen no prototypes. Believe it or not, even for a blog like SG Entrepreneurs, we wrote a business plan before getting the blog started. We even knew when we must get resident contributors to expand our base. It is quite easy to copy what we are doing in this blog, and I have seen copycats which have died along the way. We go all the way to get our system up and we try to implement everything possible. We never think that profits will come so quickly.
Here is something that Singaporeans need to learn: you must be prepared to suffer as an entrepreneur, otherwise join a company and work as an employee. Recently, I was watching a documentary called “High Net Worth” where the interviewer talks to Donald Trump why he does not encourage people to be entrepreneurs. Paraphrasing Trump’s words, if you are not prepared to work 24-7 for your business or find people and ways to enhance your brand and product, don’t be an entrepreneur and go be an employee. Not everyone is suitable to be entrepreneurs. It is the kind of advice that I like to give to some one man shows, who after a few years, are still one man shows.
Related Posts:
[1] Paul Graham, “The 18 Mistakes That Kill Startups”.
[2] BL, Writing the winning Executive Summary I - What do the judges want?
Notes for people who want to submit business ideas to us for funding:
1. Please send us a 2 page executive summary to this email address. Don’t send it to us in your email, but use a word document. Do put your contact details: telephone and email contact. If you have problems writing an executive summary, check this article to get some clue: Why and how do you write an executive summary?.
2. If your idea is a derivative from someone’s idea, we will query you without fail: how do you eat into the market share? what makes you different from the original idea? Can the guy with the original idea destroy your startup by doing something similar? Facebook-lookalikes and news aggregators are common ideas which we will not bother to reply unless you have a better idea to protect your markets. So go back to your drawing board.
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24 Comments, Comment or Ping
Cobalt Paladin
Die lah! Lucky I didn’t look for funding, coz I would have been rejected immediately because I started as an OMO (one-man operation). Sigh, now it is even more pertinent that I can become a global success, to show that there is no fix formula of identifying a successful idea and entrepreneur/team. :p
Feb 1st, 2007
BL
Cobalt Paladin,
I thought that you have a team at least for your own enterprise (you are running a business with a few people). Of course, in the prototyping stage, you might want to source out a possible candidate to do business development or build technology for you right?
Feb 1st, 2007
Paddy Tan
While I appreciate this article, I think for ‘1. One man show is bound to fail.’ this is quite subjective.
Yes, it may be a reason to have the application to be rejected here but I like to urge all to evaluate and evaluate again. It doesnt mean that just becos you are a OMO (one-man operation) you are bound to fail.
In fact, use this as a force to push you further.
Paddy
Feb 1st, 2007
wonderdoggy
good article BL. Also agree with the other 2 on the one man show thing. I think no hard and fast rule. It can be a one man show initially but the understanding should be there that down the road, key management players need to be brought in to help with the business.
Feb 1st, 2007
Aaron
Thanks for the hardwork. We really appreciate it.
Feb 1st, 2007
DK
I argee with Paddy. One man operation doesn’t mean it will fail. Indeed, many OMO failed, but that does not mean all OMO are bound to fail.
Do you know the Rich Dad’s B-I triangle by Robert Kiyosaki? Robert (or rather Robert’s rich dad) said that to successful, an entrepreneur must be able to fill all the roles in the B-I triangle. If he fails at 1 level, the business is likely to fail.
Perhaps most OMO failed because the entrepreneur isn’t able to cover all the roles in the B-I triangle. But if the person is capable, he/she could fill all the roles in the B-I triangle and create a successful business.
Feb 1st, 2007
Michael
I agree with DK on having a BI-Triangle for any business. But alot of the areas described in the BI Triangle can be outsourced. You can hire a lawyer for the “Legal” aspect of the business.
I would define a team as the investors, partners, employees and other stakeholders such as suppliers & service providers (eg. lawyers, accountants). A small start-up could not possibly hire everyone immediately and cannot expect everyone to come on board to work 24-7 from the get-go.
Cobalt Paladin maybe OMO… but he gathers around him a team of “resource members” he can tap on a freelance or project basis.
An entrepreneur knows what he’s good at (Core Competence) and what he sucks at - and finds people who can do those things better than he can.
Feb 2nd, 2007
Paddy Tan
“The smart boss hires smarter employees to get the company running” :)
Feb 2nd, 2007
SamCheng
“The smart boss hires smarter employees to get the company runningâ€
Only if the smart boss can afford it. How many startup can afford these employees ??? Even so, what are the chance these employee accept equity for low salary ??
Feb 2nd, 2007
Cobalt Paladin
Hi Michael,
I was OMO for 4 years. Hired my first sales staff only on the 5th year. Even now, I am doing my own accounts. Well, to be fair, I have a good circle of friends whom I can seek advice on accounting and legal related questions. :)
Strictly speaking, I was OMO for 4 years before I can start hiring staff. I would expect all entrepreneurs to tap on freelancers in the beginning since our resources are scarce.
My point is, I would have been rejected under BL’s criteria. But OMO doesn’t necessary mean it’ll not work. :p
Feb 3rd, 2007
Michael
“The smart boss hires smarter employees to get the company running”
I agree, but if they are smart why would they want to work for you?
Read up on Michael Gerber’s “The E-Myth Revisited”. Its essential reading for all start-up entrepreneurs.
What’s important is that people buy into vision and “the big idea”. When people desire to be part of a great team - the money becomes secondary.
A great vision also attracts investors. That’s what we do in sales - we sell the benefits not just the functionalities.
Feb 3rd, 2007
The Uncharted Waters
I think Cobalt Paladin is a good example of being OMO does not necessarily mean it will fail. As said, resources are scarce so entrepreneurs will try to reduce operational cost by doing most of the things himself.
For my case, I tap on some business associates who are interested in reselling or integrating my products to target some secondary markets. And same as cobalt paladin, I have friends who give me advices on accounting and legal matters.
Feb 3rd, 2007
Harro!
There is no right answer to all this. As a small island of 4 million people, to create any scalable, global, great idea will require that the WHOLE island collaborates.
The good thing about the changing mindset in Singapore is that Singaporeans today are more open to collaboration. 5 years ago, each tiny Singaporean ‘thinks’ he can do it by himself. This is a product of SG’s meritocracy training (at least those with degrees and above), self-reliance propaganda etc… People from poly have strong peer collaboration, and I noticed thrived slightly better in tech startups.
Most of my friends are doctors, auditors, lawyers, and when it comes to startups, they really provide lousy (to the extent of BAD) advice because they don’t understand small company issues.
Correct me if I am wrong Bernard, but I believe that the interpretation of ‘OMO will fail’ should be more like ‘lone ranger mentality will fail’.
With regards to ‘half-hearted efforts’ I also believe that a smaller team with strong focus is better than a larger team that is unfocused, has multiple agendas, complex communication issues and really gets nowhere. In Singapore’s context, to find such a small team might sometimes be so tough all other willing participants prefer the safety of a corporation.
The good news is that our New Media 2.0 and blogging is evolving us. I see alot of supportive collaborators in Bloggers. Everyone is ‘giving out’ each day when they post an article, making a comment. This mindset in blogoshere is refreshing compared to a daily society that ‘demands’ from us. In blogosphere, we are never OMO.
Feb 3rd, 2007
Paddy Tan
Michael, you are correct! We dont think of just monetary rewards .. it may be the ‘Start here, End all’ for some employees but it may not be for others.
For example, a startup company may not offer a good or high salary but what you mentioned ‘vision and “the big idea†may just click for some.
Just like why some are willing to step out of their comfort zones to start their own companies and not be comfy with whatever salaries they are drawing .. just to name a few. Some labelled them as fools (I being one big fool to abandon a S$1X,000 monthly salary. ha!)
A smarter employee doesnt necessary means better in everything. We are know it is impossible to be good in everything.
It is just like some are strong in operations, some in sales and some in marketing which the ‘Boss’ himself cannot be an all-rounder. So get someone good and be strong in that areas while the ‘Boss’ be good in that other areas and with a ‘vision’ and ‘the big idea’ it may just work.
Paddy
BAK2u.com
Feb 3rd, 2007
SamCheng
Small team is good then. But why did I see lack of innovation in Singapore then ? Why didn’t Singapore produce breathetaking product and service that change the world given that we can have small team of capable and competent people ???
My belief is that a team is good but not all members and role are equal in contribution, and worse, there is a tendency to emphasize that the success of a business is due to, should I repeat again, business-people.
Over time, and time again, the talent of technical ppl is downplay in our society even in a team environment. That’s perhaps is the main reasons we yet to produce innovative product and service but rather me-too system and products.
Much reward, recognition and success go to much to the business people. And the environment here is pretty run by business-ppl that lack the management skill of handling maverick and talented ppl.
I’m sure the society and media play an important part to highlight that too. Probably, our society focus too much on management and short-term business.
I read across this article talking about Google culture:
http://www.fastcompany.com/online/69/google.html
”
The challenge is negotiating the tension between risk and caution. When Rosing started at Google in 2001, “we had management in engineering. And the structure was tending to tell people, No, you can’t do that.” So Google got rid of the managers. Now most engineers work in teams of three, with project leadership rotating among team members. If something isn’t right, even if it’s in a product that has already gone public, teams fix it without asking anyone.
“For a while,” Rosing says, “I had 160 direct reports. No managers. It worked because the teams knew what they had to do. That set a cultural bit in people’s heads: You are the boss. Don’t wait to take the hill. Don’t wait to be managed.”
We talk about building the next google, skype and youtube but yet we fail to adopt their “process and culture of innovation” but rather trust in “culture of management”. When can we really learn from innovative companies ??
It sometimes fail to amaze me that companies say that innovation need to be managed by management and yet they fail to produce anything outstanding at all.
The articles also mentions:
“This is what it’s like inside Google. It is a joint founded by geeks and run by geeks. It is a collection of 650 really smart people who are almost frighteningly single-minded. “These are people who think they are creating something that’s the best in the world,” says Peter Norvig, a Google engineering director. “And that product is changing people’s lives.”
but here in Singapore, we have technology companies run by business-men who love the sight of money far greater than anyting.
Though I’m not trying to be pessimistic, I will like to say that it’s cool to say that everyone can built Google, Skype and Youtube, but in reality, the process, culture and mindset of whoever built it in a team environment has to change to one focus on innovation and embracing failure rather than definite success and monetary reward.
Feb 3rd, 2007
DK
I think it would be more correct to rephrase to something like “OMO is more likely to fail” rather than “bound to fail”.
Feb 4th, 2007
WeiChang
We would definitely consider one man shows too if the idea is good. I think Bernard’s point is that a great team is invaluable and it’ll push the individuals further due to mutual encouragements.
For us, team (whether one or more people) comes first, then the idea. This is because the team are the ones who execute the idea.
Feb 4th, 2007
Paddy Tan
Not to stir this up, but do consider those OMO too.
How many start their business with a team of people? Usually from what I see and hear, it is always that 1 person running and grow from him/herself to another and then another.
Paddy
BAK2u.com
Feb 4th, 2007
Bypasser
Interesting article but I do agree with the rest that being omo doesn’t mean one will fail. I have working friends and partners who start up all by themselves but they know how to leverage the resources available to them. I have personally heard of a private bus company owner who doesn’t own a single bus!
However, there is one thing that the need more emphasis over the rest of the factor, that is the half-heartedness of all biz. Most, if not all biz fail from the lack of PERSEVERANCE.
Feb 5th, 2007
bjornlee
@ Samcheng, great you pointed out the manager-less culture but innovation-oriented culture of google. yea, i dun think innovation can be managed. The perpetuation of a “no” culture sucks the life out of ideas.
While this debate rages on and on over Bernard’s initial comment, I just like to point out my two cents worth here. SGE is performing the role of a pseudo-VC here. When you are investing someone else’s money, you want to hedge your bets. Entrusting one man with money is obviously more risky than trusting a well-balanced team to deliver the goods and results. While hyperbole might be accused on the part of “bound to fail”, it was more of a figurative expression.
As a true entrepreneur, instead of trying to accuse those who distrust one-man-operations and defend yourself, one should think of how to answer the very intuitive questions an investor will be asking on the sustainability and scalability of your initial idea. Sure, some me-too companies and startups in certain traditional industries can be created from OMOs or if you are a genius, you can be successful yourself too. But if you want money from others, dun try to argue for the benefit of the doubt from investors.
Feb 5th, 2007
Cobalt Paladin
Hi Bjorn,
I’m sorry that my initial comment had triggered further discussion regarding “OMO”. My only concern is that good ideas may be rejected just because of OMO.
Anyway, I’ve always been thinking what makes an entrepreneur? Is that a ten-year book series that identifies them? Must a venture be a team? After a long thought (years in fact), I realised there is no definite answer. The most common trait I can see is perseverance. However, if an idea is a runaway success, then the potential entrepreneur’s resolve will not be tested.
I can understand why BL and team need to hedge their bets since they are investing other peoples’ money. (Why pseduo-VC, I thought they are VC?) If they need to hedge their funds in a team of at least two and that is the criteria, I can understand that. But stating that OMO is bound to fail, it is something that’s against my and some other’s personal experience.
I’ve joined sgentrepreneurs hoping to encourage more entrepreneurs in Singapore. That is still the goal isn’t it? Stating that OMO is bound to fail may not be very encouraging to fellow entrepreneurs.
Feb 5th, 2007
BL
Hi Cobalt,
No worries. I take your point. We do not have objections to people who want to do their startups in OMO at the start and we do not rule out people as single founders. There is no absolutes in business, and we will judge on a case by case basis whether an idea is suitable for funding with an independent panel.
As a matter of fact, SG Entrepreneurs still stick ot the original goal of encouraging more entrepreneurs with and without the MDA funding. As I have said before, some OMO business don’t need funding and they can do well. For the funding, we are tasked with taxpayers money to do a good and professional job in making enterprises work.
The conditions laid down by MDA (since they are the bankers) is that the startups should be innovative, sustainable and scalable. Most OMO, in my opinion, can be innovative and sustainable, but not scalable. When I mean scalable, I am talking about how this startup moves up towards a medium enterprise and subsequently towards a regional MNC. That involves the founder having the capability to build teams.
What I am concerned, however, is that there exist some founders who are too introverted or not open to other people who comes into the scene to help the business. They distrust others who are here to help the business and presenting an alternative viewpoint to how things should be run. It is more inherent in Asian culture than in western culture. The example that I talked about which happened to a founder, is a good example of that kind of founder which we do not want to fund. Hence it is important that we tell people that we are looking for entrepreneurs who can build teams to take their idea into business.
Feb 5th, 2007
DT
Hi BL,
Good write up and point 2 is very true. One of my entrepreneurship sites that I set up was a derivitative of a similar site in europe and US. I mistakenly wanted to create an Asian version on it. As a result it has not been very sucessful. Simply because I did not understand how the market here ticked. Being such a well connected market and with the boundaryless of the internet, creating such localised versions will only be sucessful if you really understand the Web 2.0 and its relation to the local market. Can you say Youtube is the American’s funniests home videos of the Web2.0?
Also such boundaryless scope with the internet will mean you will get alot of derivitatives/imitation business plans which will be the big problem and possibly the bulk of your submitted business plans. Infact MDA saying they want to create, from singapore, the next youtube or google implies exactly that.
Only when people start to understand what Web2.0 is and how can apply this to, localised content as well as new ideas, you will get workable business plans.
Good Luck.
Feb 8th, 2007
skai
“OMO is very likely to fail” I do agree that there are basis behind as “no man is an island”. The problem is finding a reliable partner for a startup to develop a new idea or product is very difficult in our society. How many partnerships you know that is successful? A Japanese friend said “1 Japanese is a pig, 2 Japanese is a team and 1 Chinese is a team, 2 Chinese is a pig.”
Derivatives – Did all the big consumer electronics manufacturers developed all the technology or ideas themselves? The market life for consumer electronics is only 6 ~ 9 months. Can they develop new technology or ideas at this pace or did they copy from their competitors? An Indian friend said “It will be easy to copy 95%, you will have hell if you copy only 5.” - Well, so how much to copy?
Hard work, Hard work and Hard Work yet no guaranteed success – In engineering, add 1 + 1 is 2 but in business adding 1 + 1 is any result except 2. So beware of the unexpected.
Aug 25th, 2008
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