By Dr. Don Capener
What are the most common myths of entrepreneurial practice?
There are three myths that just won’t die in terms of understanding what works and what doesn’t in start-up environments. The following mythbusting is intended for those of you starting something new or managing fledgling ventures already.
Before we begin, some credit for this content goes to venture capitalist John Ward of Ponte Vedra, Florida, who provided inspiration for these three myths. John has been a featured speaker at the Davis College of Business at Jacksonville University (JU). After providing seed funding for over 60 start-ups, he is one of the experts I turn to for practical wisdom about the entrepreneurial process.
Myth #1 – Flat organizations are the most efficient startups.
Most start-up coaches teach founders not to create hierarchy or levels of management. They preach the “start-up religion” that flat organizations breed success and product innovation. But based on my own personal experiences, and John’s, every start-up needs someone in charge– and someone other than the leader must focus on execution. Companies who are too flat or have no defined structure are usually not disciplined. Developing discipline and leadership means turning down or sequencing opportunities before wasting time, resources, and energy on the next best thing. Priorities are most efficiently set by a single leader, especially someone who has the courage and authority to say “not now” as often as he or she says “yes.” While this advice may not hold true for companies with more than $500,000 in cash reserves, it is how most successful start-ups are run today. There’s a definite structure and hierarchy to a small company poised for growth, as uncool as that may sound.
Myth #2 – Speed is the most distinctive advantage of start-ups.
Speed to market is often discussed by venture capitalists as the distinctive advantage of leading startups. In practice, start-ups that take time to hire personnel carefully, make deliberate financial commitments to make due with less physical space, and pursue lasting customer and vendor collaborations are more likely to survive into profitability. While those who hurry into these commitments fail. Take time to hire the best and brightest you can find. Interview and pursue those who truly believe in where you want to go as a company. Take time in your week to gather advice and customer commitments before making any new financial commitments that increase expenses..
Myth #3 – Great start-ups are always innovating and pivoting.
Great start-ups are more often those companies and founders that don’t get bored with focus and execution. These companies learn to exercise patience so the vast majority of customers can catch up to last year’s product or service idea before launching into something totally different. Redirecting all a firm’s resources towards the next best thing without stakeholder buy-in can be detrimental to a fledgling start-up. Adding “bells and whistles” not demanded by your most important customers is tempting, but should be avoided. Developing a new product pipeline is also very important, but not a priority until you have your first big hit. Passion for execution and customer satisfaction, as well as innovation, are advantages of start-ups. The best of these learn how to create passion around focus and execution to sustain their market position.
Some Homegrown Examples
JU MBA (’17) Alex Moldovan’s Town Beer Co. is a recent example of a Jacksonville founder who breeds passion and discipline with his growing team. Alex is successful because he can sequence the opportunities and manage both market risks and growth opportunities. He is also not afraid to take risks. Mike Shad (‘84) is another example of a local entrepreneur with passion for the car industry and who had both discipline and smarts. He followed the advice above and more than 15 years ago, sold his dealerships to AutoNation for millions.
MARKET LIFE is a recurring feature in WAVE, a dedicated news source at Jacksonville University. Email commentary and questions about market and money matters to Dr. Don Capener, Dean of the Davis College of Business at Jacksonville University, at email@example.com. Or read the latest from Dean Capener’s desk on LinkedIn.
PHOTO CREDITS: Sindy Gonzalez and Alex Moldovan