L.O.S.T. = Lessons On Startup Today
Why am I launching the L.O.S.T. series?
Before joining Adyen as a Fintech startup back in summer 2015, I used to work for an institutional investor Franklin Templeton, which I wrote about here. Recently, Franklin Templeton started a Fintech incubator jointly with EvoNexus, for which I am honored to participate as a mentor and member of the selection committee. It still brings on nostalgia whenever I’m back on the San Mateo campus.
Besides experiences in one of the fastest-growing Fintech startups, in the past years, I’ve also explored entrepreneurship at 996Makers, investing in early-stage startups such as Plum.wine, and writing about global tech strategies in both English and Chinese media (e.g. on Airbnb, Alipay/WeChat, Bytedance, and Meituan)
Inspired by the various startups I’m now seeing at the incubator, now it’s a good chance to share some of my thoughts based on all of my past experiences (without disclosing the specifics of those startups). I’m going to focus on 3 topics each week and I’ll try to avoid repeating the cliché and keep my arguments as concise and on-the-point as possible.
Without further ado, here is the 1st post of the series:
It is still a general perception that hardware is not an attractive start-up idea. The development cycle is long, the distribution channels are stubborn, and the supply chain is difficult to manage.
However, on the flip side, hardware can establish higher barriers to entry so it’ll make your startup hard to compete with. (Even if your competitors have good access to OEM manufacturers in Shenzhen and thus can copy your prototype at lightspeed, it is still largely true.)
Just like when many pure “online” tech companies pivoted to the “offline” space to find more competitive advantage, some “software” companies start to look into having a “hardware” strategy to gain some edge.
The trick is how you can convince potential investors that you can handle all the hard things about hardware: the development cycle, the channels, the supply chain, etc.
A great source of confidence comes from your team. It’s key to have people with strong hardware backgrounds on your team, not just because they know how to make it work, but also because they know how/when to pivot and adapt when it doesn’t work.
Data is not everything. It’s almost a cliche when startup founders use the line “our data will show…” as a last resort (or even worse, a templated response) to all questions.
Data is not valuable unless you can shape a story around it. People start to compare data as the new crude oil, but remember crude oil was largely treated as waste until the fuel-burning engines were invented. What matters is where you can go and what you can achieve with these fuels.
Meanwhile, nothing is possible without data. When you pitch to investors, it’s extremely hard to show them your idea would work without any data point or track record. This is the same dilemma as all the jobs require previous compatible experiences but there’s no job to start with zero experience.
The key is to always be hustling and scrappy so as to show your commitment. No money to attract initial users? Start with money from your friends and family. No resource to come up with a minimum-viable-product? Start with part-times and even freelancers. You need to dig your own data out of the mines.
3.Enterprise / Institution
Be humble when you sell/pitch to enterprises and institutions. I know deep within everything entrepreneur believes he/she could be the next Steve Jobs or Mark Zuckerberg, but too much ego will only make you look like Travis Kalanick or Adam Neumann.
People in the enterprise world spend years if not decades in the industry and are more likely to have knowledge and experiences that are in your blind spot. Professional institutional investors make their profit from other people’s bad decisions and biases, so don’t underestimate their judgment on you.
Most of the time, when your ignorance gets the best of you is when you lose your perspectives. Why are you there pitching to them? Not to show you are smarter than them, but to gain resources to fuel your startup’s success. Such resources could be their money (if they decide to invest), advice (which are valuable as we know), or even criticism (which is painful but good medicine for you).
If you put your ego aside and listen well, you are more likely than not to spot on some useful tips. Plus, accepting criticism well can help you keep the door open for a second chance or open new windows for surprise opportunities.