I meet with entrepreneurs quite often. Having been entrepreneurial my entire career, I’ve been lucky enough to spend time with a lot of really intelligent people with their own ideas. Doing so helps me be better at my job because I routinely train myself to look at challenges from a fresh perspective.
The problem is, there are too many entrepreneurs — and many of them have a high sense of expectations and self-worth. Most everyone with an idea thinks they can build a business, and who am I to tell someone not to pursue their dream?
When I meet with entrepreneurs there are always certain criteria I look for, and specific questions I ask them to answer.
The first and most important question is, “What are you trying to do?” Even more succinctly, I ask them to define their business. When the response comes back with something long-winded and more than five sentences, I immediately push back and try to have them rethink it. A unique selling proposition for your business needs to be clear, succinct and to the point. If you take too long to explain what you do, it's clear you don’t fully know your idea yet.
The second red flag is when they say, “We want to beat Google/Facebook/Twitter/Yahoo/other large company at x, y or z.” If you say your single idea is going to unseat an industry stalwart doing billions of dollars in revenue and driving the core of the business forward, my eyes immediately glaze over. I’ve heard pitches like that a thousand times and I’ve seen a thousand companies go under during that same period. I respect ambition, but I love realism.
The second line of questioning revolves around how defensible your business actually is. Defensibility is key because you need to be able to withstand a large competitor coming into your space overnight. If you’re simply creating a variation on a theme and that theme is one a large company could build within a matter of weeks, then your foundation can easily be toppled.
My favorite example may be an oversimplification but I remember when “Sandwich Company A” (name redacted to protect the innocent) first came on the scene. They made (and still make) a great sandwich, but their primary claim to fame was that they toasted the buns. While nice, it was not a defensible position. Sandwich Company B, their primary competitor, who had been in business for a long time, went out and bought toaster ovens right away, removing one of the cornerstones of the new company’s messaging. It’s an oversimplification, but from a marketing perspective it stood as a simple challenge that was easily overcome.
The last line of questioning is whether the entrepreneur has a solution for an established problem, or whether the product is a solution searching for a problem.
This is one that most folks find hardest to stomach. Too often the idea I hear about is a feature of a larger challenge, or it’s an innovation on an idea that consumers may not be looking for. If you build a better mousetrap, but everyone has the previous version of the mousetrap and it has 100% customer satisfaction, the new mousetrap will not succeed. There is no consumer demand for that kind of innovation.
What’s more, if you create a simple clean-up solution for the mousetrap, but it’s a separate add-on and the company that makes the successful mousetrap can simply add it on to their existing trap, then your stand-alone solution won’t be as exciting an option.
None of this means entrepreneurs shouldn’t pursue their dreams. They should — but with some realism and a filter on expectations.
Not every idea can become a company, and in some cases a great idea can simply lead to a job at a company interested in pursuing your innovation. Rather than always trying to build a company from scratch, some entrepreneurs should seek out partnerships with companies in the category they are looking to innovate in. Partnering can be a great way to build a new concept.