Posted by: David Croslin
angels, Funding, innovation, invention, Startups, Venture Capital
I have talked to thousands of startups over the last 15 years. And most of them make mistakes that dramatically limit their overall potential for success. An unbelievably small fraction of startups succeed and there are good reasons why.
A young developer has a new idea and he has dreams of phenomenal success. Through a family member he manages to get time for a discussion with a very wealthy investor. The developer comes in and immediately proclaims “I am here to make you rich!” The investor replies “I am already rich. You are here for me to make you rich. Come back in the future when you have control of your dreams and you can see the difference.”
We all have dreams of creating the next Google. Or Facebook. Unfortunately, our dreams can get in the way of reality and our excitement can get us booted out into the street.
I have received proposals in the last week from four different startups (that do not currently exist) that each of the founders projected would generate over $1B in revenues per year within three years. I got one proposal where the founder said the full market potential would total one TRILLION dollars within four years. Now, please remember, THESE DO NOT CURRENTLY EXIST! The founders each felt they would become a dominant player in the market within the first year and that revenues would grow over 1000% each year. The largest competitors in each of the markets were very large, multinational corporations with massive infrastructures and have been dominant for a minimum of 20 years each.
In each case I told them to reduce their dreams to the ‘possible potential’ instead of the ‘lottery winning potential’. They didn’t understand why I couldn’t see their dreams.
Was I wrong? Possibly. But, every meeting I have ever been in where a startup stated potential growth at these rates has ended in disaster. The founder immediately loses all credibility. It doesn’t matter if their dream is absolutely accurate. No one standing on the outside of that dream can visualize such extremes. How do you deploy the needed infrastructure? How do you hire and train sufficient staff? How do you overcome being destroyed by the existing dominant market competitors?
We all want to win the lottery. The odds are staggeringly small. Keep your dream estimates of success to yourself.
If you have a truly innovative, disruptive idea, you won’t need huge dream numbers to sell the idea to investors, partners and advisors. State possible numbers and say ‘we feel the potential is actually greater but feel complete confidence in these numbers’.
Once investors are on the inside of your dream, maybe then they can see the lottery winning potentials.
This is #7 in a series of 50 mistakes that startups make.
I am looking for several companies that I can work with on their road to success as a virtual C-level officer, board member, advisor or other relationship.
I am the former Chief Technologist at Hewlett-Packard and the Chief Product Architect at Verizon. I hold 25 granted patents that are referenced by over 400 other patents. I have started five companies and driven them to success. I have two startups in stealth. I was on the M&A committees at HP and Verizon.
Drop me a note or connect with me: firstname.lastname@example.org