Introduction

This book is unlike any business book you have ever read. It’s sexy and suspenseful and designed to “show you”—rather than “tell you”—how to turn an idea into a profitable business.

If you are thinking about starting a business or you’re having trouble getting one off the ground, this book was written for you.

As an entrepreneur, an investor, and, most recently, a senior fellow for the Kauffman Foundation, I’ve spent thousands of hours working with entrepreneurs, only to find that the vast majority of people starting businesses are doing it wrong.

The statistics are scary. The overwhelming majority of startups fail. Even startups funded by outside investors, the cream of the startup crop, fail a staggering 75 percent of the time.

What causes all this failure? First, let me tell you what does not cause startups to fail. They don’t fail because the founders lack passion or a willingness to work hard. They don’t fail because the founders refuse to risk their life savings or because no one is willing to invest. Startups don’t fail because the founders couldn’t build the software or product necessary.

Truthfully, most failing entrepreneurs are passionate, hardworking dreamers who will risk everything, and try anything, to make their startup a success. They are great people. Great people pushing flawed concepts for which no one was ever going to become a paying customer. Startups fail because by the time the founders figure out that their idea isn’t good enough, it’s too late to make it better. They only realize that no one actually wanted their product or service after they’ve already run out of money.

Seriously, it’s that simple.

But why does this happen?

How is it possible that with so many available resources and “How To” guides from successful entrepreneurs and investors, so few individuals are able to find success?

What can you do to significantly decrease a business’s chances of failure?

This book answers those questions by telling you the story of Owen Chase. Owen’s entrepreneurial journey is an amalgam of both my own experiences launching companies and those of the hundreds of entrepreneurs with whom I have worked in my role at the Kauffman Foundation.

I’ve learned that you can try to explain business concepts in a million different ways, but entrepreneurs really learn these lessons only when they witness or experience failure and success themselves. With that in mind, I wrote a novel instead of a textbook. Within these pages, you can live the startup experience and learn these lessons without actually having to go half-broke and full-crazy.

Owen’s story communicates four simple but profound ideas that anyone can employ to significantly increase their likelihood of success.

You can choose to put down this book and ignore these ideas, but the statistics speak for themselves. Ignoring these four principles virtually guarantees that you’ll join the hundreds of thousands of people every year who put their life and soul into a new venture only to watch it fail. And if you don’t fail right away, your company will meet a fate that is arguably even worse: wandering the Earth for years as a zombie startup, never growing or making any money, just barely surviving.

Don’t be a zombie. Open your mind to these four ideas:

1. IDEA 1: Startups are about finding customers, not building products.

No entrepreneur fails because he couldn’t build his product. He fails because no one wanted to buy what he built.1

Here’s how a startup typically works:

1. An entrepreneur gets an idea and his mind starts racing with all the possibilities of what it could turn into, the impact it could have on the world, and all the money it could generate.
2. Next, the entrepreneur builds his idea. He spends a lot of time and money trying to build the most comprehensive version of it, rarely showing it to anyone because he wants it to be perfect before potential customers see it. First impressions are everything!
3. Then, the entrepreneur brands his idea. He develops a catchy name and a logo. He purchases a domain and builds a web site. He creates marketing materials. This has to look professional, he tells himself.
4. Finally, he goes out looking for customers and, more often than not, strikes out big time, causing him to realize that something is wrong with his initial idea. He revisits the idea and starts brainstorming how to make it better. And then he repeats steps 1 through 4 all over again, spending a lot of time and money, without making any forward progress.

This is the startup loop of despair. It can last anywhere from a few months to a few years, all before the business generates any substantive revenues.

But successful entrepreneurs know that the startup loop of despair is completely avoidable. They know that once you come up with a great idea, the very next step should be to find potential customers and determine if your product is even worth building.

Finding customers before building your product will guarantee that you will build a product people actually want by figuring out which features and benefits are the most valuable. Above all, this means your startup will actually generate revenue.

1. IDEA 2: People don’t buy products or services; they buy solutions to their problems.

People don’t go to the store looking for features and benefits. They don’t walk down the aisles or surf the Web looking for the longest-lasting this or the least expensive that. They have problems that need solving. They shop because they can’t get a stain out of their carpet, they can’t reach their kids when they are out at night, or they are worried about having enough money for retirement. People look for things that can solve these problems, and they will pay money for them. These people are called customers.

The trouble with customers is that they are totally irrational and unpredictable. You can’t assume that because you’ve diagnosed a problem, customers will agree with your assessment. Or, if they do consider it a problem, you can’t assume that it’s the kind of problem they’d pay money to solve.

For every Instagram or Pet Rock, there are hundreds of thousands of failures that never made a dime. For every Facebook or Snuggie, there are hundreds of thousands of zombie startups lurching around, mostly dead, clumsily bumping into one another at networking events.

The only way to find out if your customers have a problem worth solving and whether your idea solves that problem is to directly interact with them.

1. IDEA 3: Entrepreneurs are detectives, not fortunetellers.

Developing a business model that makes money is not a creative writing exercise. You can’t just put your best guesses down on paper, wait for a bank or investor to believe your story, and then start executing on your plan. Unfortunately, no matter how smart you are, you can’t predict the future.

What separates real entrepreneurs from daydreamers and wanna-preneurs is the search for facts. Successful business owners understand that their initial ideas are filled with a number of assumptions, many of which, if guessed incorrectly, could change the entire trajectory of their business. The only way to determine whether your guesses are right is to test them in the real world.

Think that you can sell your product online rather than with a sales force? Test it. Think that you’ll be able to find a huge partner that will distribute your idea for you? Test it. Think you can charge $49.99? Test it!

Don’t waste time debating with investors, partners, or employees whether your guesses are right or wrong. Instead, spend the least amount of time and money gathering evidence that can prove or disprove your assumptions.

1. IDEA 4: Successful entrepreneurs are luck makers, not risk takers.

Most people assume that successful entrepreneurs are a lot like professional poker players—gamblers who take huge risks with their capital. The analogy is a good one because successful entrepreneurs and professional poker players do have a lot in common, but it’s not what you’d expect. In reality, neither views himself as a gambler or a risk taker.

Instead, they have learned how to minimize risk and generate luck. They do this by making a series of small, calculated bets to test their assumptions and find new opportunities. Each small bet is something they can afford to lose because it’s a small investment of time or money. Eventually, these strategic bets yield opportunities that both professional poker players and successful entrepreneurs will use all of their resources to exploit.

To the outside world it looks like they just get lucky a lot, but to the trained observer, they only go all in when they know they have the best chance of winning.

• • •

There are plenty of books written for those that want to chase the entrepreneurial dream. This is a guide for those that want to achieve it.

There is no secret DNA sequence or genetic lottery ticket necessary to find success at the end of the entrepreneurial path. No academic pedigree or corporate background can prevent the zombification of your startup. Learning and applying the lessons in this book will...