Which business models work ?
While coming up with a start up idea, one often struggles with what business has the best potential to succeed. The best laid out business proposals are often laid to waste in the actual marketplace and perhaps that is the essence of 'destructive capitalism' which breeds the maximum efforts and maximum failures that in turn throw up a few huge successes that transform the world. Maybe success is indeed over rated and failure is the what makes the world go around !
While I have often been critical of the ' role' the Venture capitalists(VC's) and 'Angel investors play in the real world by being both the perpetuators and the victims of ' fad based investing' and jumping on the ' hottest ideas of the time' in a wave of mass hysteria as we saw in the DOTCOM ( DOTBOMB era really ! ) , even entrepreneurs need a dose of reality when asking for outside funding.
Sadly, quite a few entrepreneurs I have known do not really deserve the funding that they are seeking others to provide them. I often ask myself if I would indeed fund some of my own business ideas if I were an objective investor and the answer is often times a brutal NO ! Some plans and business ideas are poorly laid out and sometimes in areas where the margins are extremely slim or non existent to begin with or gestation period so long that even funeral homes wouldn't take bookings so far in advance. Sometimes the business is proposed in an area where the entrepreneurs has limited expertise which is at best 'distorted positivism' or at worst case ' 'entrepreneural self delusion and escapism.' Fact is we live in an extremely competitive business environment and one needs an EDGE to make it (besides loads of luck and the cash that come with being lucky of course)
The businesses that I have seen become successful from start- up level shared the following characteristics;
1. Ideally if your best customer provides you the start up funding as well as the business to make your company cash flow positive from the word go. This will only happen if you have a lot of experience in that particular field and the relationships cultivated over the years for some establised corporate to take that punt on you. This is extremely rare and difficult to pull off but this is the ultimate gold plated AAA standard ( Not issued by the highly discredited rating agencies of course)
2. One has an investor who can act as an objective advisor as well as provide funding and genuine business guidance and contacts to help open doors. This investor can be an established entrepreneur looking to diversify or invest in a new idea that your business has an edge in.
Biggest advantage in both these options is the entrepreneurs gets paid (usually a nominal salary)while the business gets off the ground (or even if it crashes) so no starving entrepreneurs syndrome here !
3. Self funding with a little help from friends and family : This is probably the most realistic scenario for majority of small start ups. I can say that while this is not as glamourous as option 1 or as solid and secure as option 2, one should never underestimate the power of ' less is more' or as my close friend said the ' blind leading the blind'
When I started my business, conserving cash was the top priority so a close friend of mine who also had a start up and I decided to share an office in a serviced office and also share the cost of an accountant and secretary. Over 3 years of such an arrangement helped saved serious $$$ and also equally importantly helped provide a partnership and a sounding board for new ideas and a shoulder to cry on when things did not seem to go right. The mental and emotional support and the confidence of being with like minded people is as important in my opinion as is cash infusion since entrepreneurship is a long lonely path and one needs a good solid team to provide the support for one to go all the way.
Here's a special cheers to all the little guys supporting each other !
