Succeeding as an entrepreneur is no easy task. Here, Delos Chang, serial entrepreneur and angel investor, debunks 5 myths about entrepreneurship and investing.
Waiting for the right time
It is a very common belief among entrepreneurs and investors that they have to bide their time and do things according to a perfect plan. Yet things never always go according to plan 100%, especially in a startup or investing environment. Just as the Lean Startup notes, you will never have all the right answers immediately and you will never be perfectly prepared. The best you can do is start on the problem and iterate as the problem space reveals itself. The map is not the territory. Be okay with uncertainty as waiting for the right time is impossible because there is never a perfect time.
Not knowing can be advantageous
We have been conditioned to think of expert domain knowledge as a pre-requisite to entrepreneurship and investing. Yet being new to something can sometimes be a good thing too as lack of expertise can illuminate different possibilities that entrenched experts may not have previously thought of. Some of the best innovations in entrepreneurship have come from apparently disparate fields that bring different modes of thinking to the table.
Base-Level Profitability is Important
Many entrepreneurs, in hopes of chasing their vision and growing quickly, do not put enough effort and attention to reaching a base level of business profitability that matches their expenses. Yet, base-level profitability is vitally important because it validates the product-market fit of your vision. When you have paying customers, you know you are on the right track. Furthermore, this approach alleviates the psychological pressure of building a business and eating into your runway. Paul Graham, the founder of Y Combinator, calls this ramen profitability (the revenue point where you can sustain off ramen). One of the biggest killers of budding businesses is a drop in morale and reaching base-level profitability prevents that.
Venture Capital is not Always the Answer
Capital is important in any business, but it’s not always necessary for every entrepreneur to go with venture capital financing. The allure of a capital injection can be distracting to entrepreneurs and fundraising takes a lot of time and negotiation. If you have enough runway to propel your business forward for a year, what’s more important is building the actual business rather than seeking capital at least initially. Usually, by focusing on the business itself before seeking capital, you can develop the expertise and confidence to raise future valuations anyway, should you go with equity financing.
The Biggest Risk is Taking No Risk At All
Perhaps a little cliché, but time is finite and what may appear to be the safest option may actually be the riskiest option of all. As mentioned in the first myth, there is no such thing as the perfect time and you never want to look back on your life wishing you pulled the trigger. At the end of the day, most entrepreneurs fear failure and running out of money. But failure is also a part of the process of improving. Thus, while many choose not to look at the worst-case scenario out of fear, Chang encourages it. By analyzing such scenarios, we can see that perhaps there is nothing to fear should we fail. The biggest risk is taking no risk at all.