Wednesday, June 06, 2012

An Awkward Entrepreneur

I believe I am not a true entrepreneur, because monetary reward is not my primary motivation, interest or objective. Traditionally, we think that entrepreneurship is the process of creating a business which makes money, right? Before I make a fool of myself, perhaps it would be wise to understand what entrepreneurship really is.

What is an entrepreneur?
Someone who take risk to start a business. What is a business? A business is an organization engaged in the trade of goods, services, or both to consumers. What about profit? Isn’t the sole purpose of business is to make a profit? I like the following explanation

“In my job as a university professor, the question sometimes arises in class discussions about the purpose of business. One usual answer is "to make money", but I don't think that is right. It is unsatisfying to be in business and have as your only reason that of making money. There is a saying that "you need health to live, but you don't live to be healthy". Profits are like that for business. A company needs profits to continue, but profits are not what the business is for. “ – Richard Field

According to Steve Blank, a startup is a temporary organization designed to search for repeatable and scalable business model. What is a business model? A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). Interesting, so it’s about creating value, where money is just one of the value.

My Definition
IMHO, a business needs to be profitable eventually (might not be initially, depending on your financial runway and patience) to be sustainable, which I totally agree. After sustainability, should we try to derive more profit? I believe a little bit of extra cash would enable more freedom and levies to explore other opportunities or to experiments with new ideas, which is good. After good profitability, should we aim for great profitability? My answer is no, because profit and money is just a meaningless number game.

It kind of feels like the Maslow's Hierarchy of Needs, where we need money to satisfy some basic needs such as food, house, transportation, health and etc. Once those basic needs are met, using money to buy a sport car or diamond ring isn’t much more satisfying than spending good time with friends and family; the satisfaction difference between a private yacht trip and a backyard BBQ isn’t by a big enough magnitude.

Since super profitability is not my game, thus it wouldn’t make sense to pitch my business idea to potential investors, as these people are looking for profit, like a 10x to 100x ROI kind of thing. Every time I wrote a business proposal or do a pitching, I felt kind of absurd to pluck numbers from the sky and doing some projections where we shall make millions of dollars 3 years down the road; or to come up with some business model where I am not interested about. In my mind, we are lucky if we didn’t go bankrupt and achieve sustainability or basic profitability. Then again I got ridiculed when I told people the business will make one or two hundred thousand per year; I realized not that long ago that this is called a lifestyle business. Now I know that I like the idea of a lifestyle business (making enough, not necessary more). Ever since then, I feel that there is no point in attending any pitching sessions; in fact, I don’t think I would dare to take money from investors for 2 reasons: I am not motivated to give him a high ROI, and perhaps the extra adult supervision to make sure I focus on profitability go against what I am really interested to do.

Little Money Required
Don’t we need money when we start a business? Yes, but not much is required. Basically the startup cost of a software/Internet company could be pretty low (I'm not doing research or production intensive stuff), and the major financial burden is to be able to sustain my lifestyle for one year or more. I have savings, and my monthly expenses is really low: I own a property which cost less than RM100K on loan, didn’t own a car (share with my wife and dad), have no kids or parents to support, and my monthly expenses is probably around RM 2K per month. Theoretically, I just need RM 24K to survive the whole year; in worst case scenario, I could take up a few freelance jobs to ease the burden.

Play on Strength and Limitation
I don’t do a startup which cost RM 1 million to build and to compete, or need to depend on sales and marketing skill which I don’t have to succeed. I didn’t build a product (e.g.  accounting software), because you need sales people to push the sales (the SAAS thingy might ease the pain slightly, but great sales and marketing effort is still required). I didn’t do a Groupon clone in regardless the insane number of monthly revenue posted, because I know it’s a sales and marketing game which I am not good at. I need something which my software development skill could give me a competitive edge, and a mechanism which could generate profit without the need to do too much sales. Thank to Adsense (income without sales), I opt for a publisher model; since I can't churn out an article everyday like a super blogger, I did a crowd-sourced review site.

Passion + Eat my own dog food
I always believe I need to do something which I am passionate about (or at least have some interest), and I need to create something which I would be using (eat my own dog food). Someone says I should build a recipe portal because it’s wildly popular and profitable, but it’s something I have neither interest nor understanding of why people are obsessed with recipe. In fact, some gossip blogs reap more page views and profit that what I did; it’s just not my cup of tea. I used to develop lots of software products for customers which I would never end up using; the process is unsatisfactory, and the result is mediocre.

I enjoy exploring new food, but not talented enough to do it on my own; so perhaps an app could help me with that.

How do I choose on which idea to work on? 
It needs to solve a problem, usually my problem (if I am the user, then I could understand the pain well). I need to have a strategy on how to tackle the problem, besides believing that I could do it better than others. Sometime when we look at a lousy product, we think we could create something better by adding a few cool features or design a better user interface. For example, Jobstreet might not a very good website, and we could probably come up with a dozen checklists to create a better product. The real question is: how do we shake the market dominance of Jobstreet? Or how do we solve the chicken and egg issues (no advertisers/job, not users; and vice versa). Tips: truly believe that there is a smart solution to the "chicken and egg" problem (I was inspired by an article about how MS-DOS beat PC-DOS by using the emulator strategy, can't find the original article).

I have problem searching for good restaurants when go out on dating; some restaurant directory websites are not working very well, and I figured a way to source/organize the required database.

Dream too small?
I think most people are encourage to dream big and change the world, so a lifestyle business isn't really interesting for them. Once I try to get a co-founder to develop a local restaurant reviews site (already good tractions) with me, but my "vision" is too small for him. He wanted to be like Instagram, be a global player with millions of users. The same thing apply to investors, they wanted something scalable and global.

Once I share the idea of a lifestyle business to a friend, and he claims that I am sort of anti-capitalism, didn't dream big enough and not confident. The strange thing is, I felt the exact opposite of his remarks.

Practical I may be, but I don't think my dreams are by any means small. I don't believe size are measured by the millions of profit (it's a nice bonus, but not the primary motivation). How big is Wikipedia? Is Instagram big before bought by Facebook, or suddenly it became huge?

I start small and local due to financial and manpower limitations, and by choice (or lack of choice) for not pursuing the funded path. I would be glad to take a bigger leap if there are more resources at my disposals; perhaps my current startup shall provide the basic financial foundations for my future startups. One of the funny thing I like about Southeast Asia is the lack funding and successful exits; meaning less chances of bootstrap startup like me being stampede by well funded businesses, and less people doing startups means the window of opportunity for me is wider. But I sense things are going to change rapidly in the coming years, so it's time to step up the game.

I admit that profitability is not my primary priority, where I am more interested in solving a problem and getting user validation through tractions (I am happy when people actually find the app useful). I believe in creating value, and economic value isn’t the only one. I can’t get myself to build a business for the sole purpose of making money; it needs to be something which interest me, meaningful and serve a purpose (solve a problem). I am not anti-capitalism, neither do I worship capitalism.

I believe I am a techie/hacker who accidentally became an entrepreneur (it wasn't possible until Bill Gates, Larry Page and Mark Zuckerberg came along and show us what's possible); sometimes I still put technical awesomeness before business priorities. There are things I’m willing to explore and learn (growth hacking, marketing, etc.); but there are things where I prefer to leave it to someone else who could do a better job than I am, if there is such a person for me to depend on (e.g. Sales).

An awkward entrepreneur I may be, but at least I understand who am I, what I'm doing and what I wanted to do. Whether my way of life is acceptable to others or fit general wisdom is not really my primary concern, unless I am taking money from others.

1 comment:

Anonymous said...

I understand your point about not wanting to focus exclusively on profit. If you build a good profit you'll have a chance to make money. But generally this is a step that many beginning entrepreneurs ignore and their startups fail because of it. I think that startups generally face 3 big problems - coming up with a quality minimum viable product, finding customers, and settling on the right business model. No product is ever really finished, so you have to have some judgement about when a product is viable in the market and learn to trust your own instincts. Finding customers is really hard, but between search ads, social media, the wealth of options available at BuyFacebookFansReviews for example, and all of the other dozens of means of promoting yourself through content marketing and blogs, there's ways to go around getting customers through hard work even if you don't have the money for a PR agency. The last step is also quite hard because many startups want to give away everything for free and rely on selling ads to make money. This is a risky move for most companies and an easy way to kill your company if you're not making any money. I think their is a place where listening to your customers can be exceedingly valuable, but you should listen to their concerns to solve their problems, not to just give them whatever they want and get bogged down in trying to solve a problem without a complete picture of where you're going with it. Making money is not an evil thing - it allows you to sustain a business. A lot of startups die because they run out of money so this is a bit of a concern to me IMO that many startups don't focus enough on to be quite honest. Odds are you're not going to be acquired by Google or get enough traffic to live off of ads so having a wise business model is a serious consideration.