1. Michelle Mudge-Riley ’99
Entrepreneur-in-Residence 2016-2017
Proving a Business Concept
So… you’re thinking of starting a business? Congrats! You’re on your way to being your own boss and doing something special and significant.
No matter what your idea is, proving your concept is valuable to people. To find out if people will actually want to buy what you intend to sell, consider this: How many people have you tried to sell this idea to, excluding friends and family? Ideally, talk with at least 100 people—preferably more—to test your idea.
When you go through this exercise, it’s interesting what you’ll find. Maybe you assumed people would pay $1 for your product when they would be happy to pay $5. Perhaps you thought everyone would love the product in blue, but you found out only one person wanted blue and everyone else wanted orange.
The point is, we all have biases, likes, and dislikes, so we make assumptions about the idea we fall in love with. But if you want someone to buy your product, you need to find out how to combine your idea with what your customer needs and wants.
Try asking 10, then 50 people, about your idea. You’ll be amazed at what you learn, and you just might get that much closer to making your dream of a successful business come true.
2. Luis Martinez ’91
Director, Center for Innovation and Entrepreneurship
Developing a Business Plan
While conventional wisdom suggests that a business plan should project three to five years ahead, keep in mind that startups are not just small versions of big companies. Instead, think of your business plan as an agile document that allows you to constantly adapt while keeping the larger goal in mind.
My advice: Start with a canvas. Develop a one-page diagram of how you create value for yourself and your customers. The goal is to provide a structured learning tool as you discover how your organization creates and delivers value. It is a versatile blueprint, a working document to be revisited.
Startups are built with assumptions about the business, customer, market need, product or service, revenue streams, and cost structure. The canvas is a way of articulating assumptions about your business, prioritizing where to start, and tracking ongoing learning.
Drafting your canvas is just the beginning. Now, ‘get out of the building,’ and test all the assumptions on your canvas. Go out and listen, gathering feedback from potential users, purchasers, and partners. When your product or service is refined enough to sell beyond early adopters, then you’re ready to write your business plan using a final, proven canvas as the basis for scaling up your business.
3. Chris Warren ’78
Entrepreneur-in-Residence 2014-2015
Startup Fundraising
Knowing your startup fundraising options is important.
Self-funding allows startups to avoid raising money from outside investors and gives an entrepreneur a low-risk chance to grow while retaining control of equity. Friends and family want to see you succeed, but beware of the adage, “Don’t mix business with friends.” If your startup offers something new, crowdfunding platforms give people the option to invest in return for the chance to get the product before the rest of the world.
In the business sector, strategic partners may be interested in licensing or investing, and angel investors often provide mentorship and networking benefits. Venture capitalists fund about one percent of startups each year and generally seek those that will generate enormous returns. Grants and loans can also help with funding. While bank loans are generally not favorable to providing money for startups, there are many government agencies that provide loans or grants—economic development officers are a good place to start. In addition, consider entering an incubator or competition with prizes that include cash, consulting, and services.
Not all of these sources will be a match for your startup, but knowing your business inside and out will put you on the path to successful funding.
4. Dante Suarez
Associate Professor, Finance and Decision Sciences
To profit or not to profit?
That is the question. On one hand, the objective of a business is to maximize profits. On the other hand, a nonprofit entity has a completely different reason for existing, a specific philanthropic mission that trumps profits. As you consider a business venture, how do you determine your organization’s direction?
Actually, for-profit businesses may have many more objectives in mind than just maximizing profits. Ultimately, customers hold the company accountable, and the customers may be driven by a social mission. Conversely, the mission of a nonprofit, while charitable at its core, must also be sustainable—the ability to support operations with a longer horizon in mind.
Whether we as entrepreneurs decide to start a socially conscious for-profit business or a viable nonprofit one, we must be sure that it actually achieves what it sets out to do. I have personally had to learn the lesson of how hard it is to provide a service that is useful to the community I am trying to improve. Before we move forward, we must get in the shoes of the people we are trying to help. Only then will we really understand our target community and its needs, and begin to think of ways in which we can improve lives—with or without profits.
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