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Whats more important than time and capital in a startup?

I often hear entrepreneurs say that a lot of tech startups fail due to of lack of capital.


I have a different view. I believe that a lot of tech startups fail because of inefficient use of time.


I realize that (a) time and money have a strong, 1st level relationship and (b) capital often buys a startup time or "runway". However, in my experience the chief enemy of a startup is wasting time on activities that don't validate the idea, business, or concept sufficiently to raise capital.


My experiential albeit anecdotal evidence for this is the post-mortem conversations I have with myself, my teams, and other entrepreneurs at the end of a venture. These discussions are often a long list of sentences structured like this:


I cannot believe how much time we wasted on ...


  • Talking, thinking & debating while not doing and executing
  • Design, layout, logo, branding, etc. that looked cool but no one saw
  • Business modeling and Excel spreadsheet manipulation
  • Travel
  • Hunting down and pitching investors without anything "real" to talk about
  • Native mobile app development
  • Managing a bad hire


Each of the above wastes time and cuts into the little bit of "runway" a startup has.


Startups need time to get validated learnings that answer a couple of basic questions, e.g. Is there a business here, and if so, what are its characteristics?


Time is needed to:


  • Develop and get something to market to test
  • Run a series of experiments
  • Learn & fail
  • Uncover, refine & eliminate assumptions
  • Discover, test and validate the market
  • Uncover opportunities not present in the business plan
  • Raise capital


Raising capital is tough; however, capital exists and you can add more to your startup if you have good evidence to backup your story.


Time, on the other hand, just passes by, marches forward and doesn't come back.


Be efficient and effective with whatever time your startup has.

42 Replies

Paul O'Brien
14
0
Paul O'Brien Entrepreneur • Advisor
Tech Economic Development and VC CMO
Great observations but I'd push you even further: Team team team. First, last, and only thing of value.

You even said it, "the chief enemy of a startup is wasting time on activities that don't validate the idea, business, or concept sufficiently to raise capital." The time wasted is the symptom of a cause: People

Startups don't fail because of a lack of capital they have a lack of capital because they are failing. The reason you most frequently hear that they ran out of capital is that very few founders are going to acknowledge themselves as the reason for the failure; they defer to a symptom of what happened, running out of money, not the cause.

Capital funds and is used efficiently by the team. Time is allocated among your team. Startups fail because of the wrong team resulting in insufficient, poorly managed, or misappropriated capital and time.

Consider the discussions you explore:

  • Talking, thinking & debating while not doing and executing - wrong people or lack of experience executing.
  • Design, layout, logo, branding, etc. that looked cool but no one saw - lack of marketing
  • Business modeling and Excel spreadsheet manipulation - Usually a CEO lacking the COO/CFO experience to know what/how to model and when enough is enough
  • Travel - Right people having the right conversations makes travel irrelevant until it delivers measurable results
  • Hunting down and pitching investors without anything "real" to talk about - The right people are worth talking about. Investors don't just fund a revenue generating lean startup; they fund the people who can succeed.
  • Native mobile app development - The right technical co-founder and engineers (or advisors) who know if this should be built in house and how, or outsourced
  • Managing a bad hire - team.

Of what you need time for, I'd argue it's more important to get the right advisor/consultant/hire on the team who can accelerate these learnings for you. "Learn & Fail" does not mean test things that have already been tested or learn things that people already know. 99.9999% of the startups I've watched fail failed because of a team insufficient to the task and an ignorance of or unwillingness on the part of the founders to invest in the right team.

Daniel Drew Turner
3
2
Interaction Designer, Xerox PARC
More or less, in broad strokes, yes.

For instance: time after time, it's been demonstrated that even a week of user research/product development/customer development (not the same things, but conceptual and practical overlap) can save months of going in the wrong direction, and dog only knows how much money. Steve Blank, Laura Klein, I, and others have written about this from practical experience and theoretical grounding.

But so many startups seem to misread Ries, to give one example, and think they need to "ship SOMETHING" as soon as they can get code to work. There's the sense that thinking doesn't equal doing or making, and that's just weird. I don't know if it's pressure from investors who don't understand (and keep in mind that they fund 100 startups expecting 94+ to fail outright). But I wish we could get over that "code is real, observing people is fake" or "my vision is sacrosanct" or "well, I want it" attitudes; we'd see failure rates drop, extrapolating from real data.

Build-->test-->iterate does not mean "build as soon as you have an idea". Dude, everybody has an idea, if not dozens. That's your hypothesis. Test it against real data. That will reduce your waste of time and money -- even if it's "just" other people's money.


Cheree Warrick
4
1
Cheree Warrick Advisor
Business Plans for Companies Raising Capital, Startup CFO, Advisor at CoFounder Dating
Todd, I agree with you 1000%. So many entrepreneurs waste time asking for money before they've built a prototype and see if anyone will buy (or wants) the item. Great observations.
Chris Taylor
3
0
Chris Taylor Advisor
Director, Channel Marketing at Yuneec USA, Inc.
Excellent discussion. Nothing really matters until you find out if what you are building really has a value proposition that your target market(s) care about and are willing to pay for.
Joe Albano, PhD
0
0
Joe Albano, PhD Advisor
Using the business of entrepreneurialism to turn ideas into products and products into sustainable businesses.
Validating the product is important - building the team that is capable of efficiently validating and executing is critical.

"I cannot believe how much time we wasted on" is a bit like saying "I cannot believe how much time I waster practicing when all I really wanted to do is play Carnegie Hall". The first priority in building a sustainable business is building a team that can execute - efficiently and consistently.

Over 80% of startups that survive for 3 years or more report that they have undergone at least one major pivot - a good indication of the relative importance of the "idea" and the "team" ... and forming a team takes time. So some of the activities you mentioned (e.g., "Talking, thinking & debating while not doing and executing") are part of the process of building a team and others (e.g., "Design, layout, logo, branding, etc. that looked cool") are distractions.

You can accelerate this process with a good mentor / coach / advisor ... but not one that is going to walk you through a cookbook process to "build your business plan in a weekend". I can quote reams of statistics as well as anecdotal evidence supporting the critical importance of an external perspective - but there is even more compelling evidence that says no amount of rational evidence will sway an emotional decision.

Launching and growing your business - more precisely building and maintaining the team that will be your business - is an emotional decision ... find people you trust and learn from their experiences, then blaze your own path.
Tim Hannon, MD, MBA
0
0
Tim Hannon, MD, MBA Entrepreneur
CEO, Healthcare Forward
Nicely put Todd! As you noted, time and money are to a large extent interchangeable, but you can never get time back (in business or in life).
Irwin Stein
0
0
Irwin Stein Advisor
Very experienced (40 years) corporate,securities and real estate attorney.
Smarts. Knowing how to use your time and your capital. Knowing what you don't know and where to find the smarts that you need. In many cases you can spend the time to learn how to do something that your business needs or you can spend some money on a person who already knows how to do it well and is less likely to make rookie mistakes.
Martin Omansky
1
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Your testimony is spot on. I have seen a lot of this - wasting time on things like valuation, business plan details, etc. There is a time and place for such things, but major issues need to be settled first, such as: (1) Do you own the intellectual property rights to the innovation? (2) Do you have a grasp of the commercial potential of the innovation (market size, product or service performance, sustainable comparative advantage)? (3) Do you have real business, financial, and legal skills on your side? (4) Do you believe your own hype? (5) Have you put your own dough in the deal? (6) Have disinterested parties, skilled in the art,validated your approach? (7) Is your business model appropriate for the task? (8) Do you really want to do this? After all, it is a difficult slog, even when everything is done right.
Richard Awni
0
0
Richard Awni Entrepreneur
Project Management | Clean Energy | Solar | Go-To-Market | Emerging Technology | Branding I Marketing I Non Profit I HR
Very well put. So much time is wasted on things that are not important. Validating the product or service and then testing in the market and documenting the feedback is Paramount. I look forward to more post from your experiences.
Lucie Newcomb
0
0
Lucie Newcomb Advisor
Global Marketing & Business Development Leader | Founder| Strategist | Board Member | Advisor | Trainer | Diplopreneur
Focus, providing foundational aspects like value prop are in place. Founders are pulled in a million directions and resources are few. Focus, specifically the ability to prioritize and execute well, is essential.
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