The other night I went to another startup event. Now the startup events I’ve been going to, I’ve attended with an open mind, because there’s some really interesting speakers who present at them and I’m always keen to take on board other peoples’ ideas and learn from their experiences. However, last night didn’t really hit the mark at all. I think this is a challenge for people from a presentation point of view, being able to effectively and informatively present.
The event was about education and I don’t mean to sound condescending, but it’s always fascinating to hear people talk about education, teaching and learning, when they know very little about it. I think I was one of the very few teachers in the room and when people are talking about teaching, pedagogy and learning experiences, they’re usually doing it from a very theoretical point of view and this was the issue I had with the last event. I sat there thinking… ummm… are they talking about the education sector? I was sitting in the room with a lot of people who were tech people, but totally and utterly disconnected from education. Now that would be the same as if I went to a conference of accountants and then I got up to talk on how my new idea for fintech software was going to revolutionize the world, even though I know nothing about fintech nor accounting.
The presenter spoke in some detail about how they’ve mapped out all of their learning theories and tried to turn it into a business. Now the danger of this is that you can do that and that’s fine! I mean the bureau of statistics have some awesome data sets you can pull out and use. (You can even use them to map Canberra’s buses and Poké Stops. Sorry if you don’t get the reference!) There’s tons of great university research that’s available on this as well. But what’s the real world application for the technology? I believe, this is where so many early-stage start-ups and educational tech businesses keep missing the mark, because they’re not solving real-world problems. Then you hear that famous catch cry, “We decided to do one thing, but then we pivoted!!!”
Why do you need to pivot? Why don’t you actually work on a real world problem to begin with and solve it, rather than going “Oh, let’s pivot and pivot again and again. If we keep pivoting, we end up like a Whirling Dervish until we actually get something right. This seems totally counter-productive, yet I’m sure some people would cast dispersions on my opinion and say “Yes, but YouTube started out as a dating website!” Well yes, that’s fair enough and I take that because some businesses have been able to successfully take the core idea and adapt it into something else. This is especially prominent in the earlier days of the internet, where there are so many people fudging around and seeing what the new technology can do and asking the question, “To what can we apply this technology?” That opens itself to this idea of pivoting and the practicality and necessity of pivoting when something has been found not to work and then the tech has still to be applied to another problem and I think this is great that it’s happened and I’m not knocking that at all. However, let’s look at the failure rate for new startups and new businesses. When you see how massive this failure rate is, you can then map this to bad ideas and bad implementation of those ideas and that was the feeling I got sitting and listening to this presentation. It was the failure to be solving a real world problem.
The presenter threw up all of these wonderful ideas and theories, but then said the problem is trying to get teachers to implement it! And isn’t that the core problem with their business… nobody using it! How much technology has been thrown at the education sector over the past 10-15 years? In many schools it has been an endless rolling upgrade every year. Out of all of that technology, how much of it fails to solve an actual problem? You don’t actually have a business until you get to the critical moment when you have users saying, “Wow, I could really use that! That makes life so much easier!” So unless you’re solving a real world problem, you’re just throwing money around to build something! Sure it might look nice, someone might say, “Whoa, that looks cool.” You might get a Venture Capitalist who doesn’t understand education, but likes to think he might and is ready to throw some money your way! If you can do that, then that’s great! I’m happy for you, but at the end of the day, you’re never going to have a sustainable business into the future.
I think a lot of this is built into start-up culture as a way of making excuses for not starting out by solving an actual problem. It’s really important to balance that blind innovation for the sake of innovation, with solving a real world problem and if you can marry the two together, then you could be onto something huge!
Last night I went to start-up event in Sydney. It’s something I don’t go to very often, but I did enjoy it, as I met some really interesting people and listened to a fantastic and fascinating presenter. However, at the same time, it highlighted some of the systemic problems of the start-up world itself. It was the issue of funding. It’s one of the hardest things for Entrepreneurs to both rationalise and manage effectively. As many founders’ heads are continuously swirling with the competing needs of business development, time, financing, staffing, marketing and resourcing, it’s one of those issues which can unnaturally dominate the thought processes and conversations around business. The promise of wealth for an idea, distorts the reality of effective business development. The conversation can become so unbalanced, people forget there is an underlying need to develop a real business, rather than just endlessly fund a novel idea which can be given away for free to build a database of users.
One business discussed was in its third round of funding and based upon rough revenues thrown up and the commission structure. The business is running at a loss. This is not unusual for an early stage startup, but how long do you run at loss for before you decide perhaps this is just an expensive hobby and not a real business? The startup world will tempt people with more cash and promises of riches and ideas that you don’t need to worry about being revenue positive or have any revenue at all, just keep with your passion and it will happen! Unfortunately, 96% of this ends in tears.
As I was driving home, I was listening to an audiobook which essentially covered the same topic and gave a number of examples of companies which never made a single dollar and yet sold for billions of dollars. It should be stressed though that these are the exceptions to the rule. Taking a product to market without a real sustainable business model is just delaying the inevitable disastrous result for everyone. Whilst people might jump up and down and say, haven’t you heard of Instagram and Tumblr? Well, yes, I have, but they’re rare exceptions to the rule. The danger is that people become so focused on the exception to the rule, they forget about the rule. That rule is, that a business only survives by producing sales and generating more income than expense. Added to this, if you deliver great customer service, you ensure you have repeat business. Failure to get this right, means it doesn’t matter how much money you inject into a business, it’s never going to work, no matter how cool it is.
Whilst I’m not totally against external investment, it has to be the right external investment, as the wrong sort can push a business away from its goals and create a munted wreck that collapses under the pressure to deliver a 10X+ return. As a business owner, who has run a café as well as a tech business, I know how important delivering a real product and service is. It’s so important to get this right from the start and then, with a good revenue model in place, you’re well on the way to a sustainable business.
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