Things are looking pretty bleak in the economy today, even though there might be some improvement going on. For those that still have jobs, they still wonder if they will have a job tomorrow or if they will be among next week’s statistics of the jobs lost the previous week. Is now the time to take chances and throw in with a startup?
Seven and a half years ago, in August of 2001, the economy was still struggling with the fallout of the dot.com bubble bursting. I had been running a successful consulting business, lots of clients, as much business as I could deliver on time, and it was crashing and burning around me. All my clients were cutting back on expenses and eliminating consultants left and right.
As I watched my last two contracts wind down, I got a call from a stranger, asking me to discuss a business opportunity. Thinking this was an opportunity to meet a new potential client, I set up a meeting to discuss it.
When the meeting happened, they pitched me to become a founder of a VC-funded startup. It really surprised me! We discussed the concept for the company and what I could contribute to its success. At the end of the first meeting, I left to think about this giant step into the unknown and the risk it would entail.
Within a week, I had signed on as a founder of Airespace (well, Black Storm Networks at that time). Here is what I considered then, and what I would consider today if the opportunity came around again.
The first thing I considered was whether my experience and expertise would be enough to deliver on the technical aspects of the product we envisioned. If we couldn’t deliver the product, everything else was irrelevant. My part in the company was to make the 802.11 (Wi-Fi) part of the product work, and, oh yeah, be unique and innovative. Be brutally honest with yourself. If you wouldn’t hire someone with your own resume to do the job you need to do, you probably aren’t up to it. I was very confident that I could deliver my part of this project.
The second thing I did was to get advice from a number of friends and colleagues, a couple of whom were now VCs. That advice was to be sure the company was solving a problem that our potential customers were facing every day. There are untold numbers of startups built around a neat idea or cool product that has never become successful. Success is measured by revenue, profit, and loss. The chances for success are much higher when the company solves a widespread problem economically and smartly. As my VC friends put it, “it’s easier to sell an aspirin than a vitamin.”
The third thing I considered was the state of the economy and how that would interact with the introduction of our new product. This took a lot of thought and quite a bit of faith. At the time I was considering this decision, the dot.com bust was in its second year, information technology purchasing was very slow, and purchasing budgets for the next year were predicted to be flat to only slightly up. I anticipated that it would take 12 months or so to bring our product to market and another couple months to close our funding. All the research I had been able to do indicated that, after 2-3 years of slow purchasing, the IT budgets would be increasing at about the same time we would introduce our product.
The final thing I considered, and perhaps the most important, was the people, the other founders. This is where trusting your gut is paramount. If this doesn’t feel absolutely right, the startup might still be successful. But, the experience will not be one that you remember fondly. You will be making some of the most important decisions of your career with your co-founders. Make sure these are people you trust.
So, is now the time for a startup?
For the right product, solving a real problem, in particular, a product that saves your customers money, with a great founding team… Yes, now is a great time to begin a startup.
Of course, if you happen to get a fortune cookie with “Now is the time to try something new” in it the day before you make your decision, pay attention.