Everest and the discipline of entrepreneurship
Presenting to the MaRS E101 audience last night, I was thinking about how fortunate we are as entrepreneurs to be part of the Toronto startup ecosystem—one that greatly helps us reduce our risk of failure and embrace the vulnerability of entrepreneurship. Building a startup is not easy. At times it feels as if one is climbing Mount Everest: gasping for air and trying to figure out what to do with limited resources before our oxygen runs out.
This quote resonates:
“Running a startup is like being punched in the face repeatedly, but working for a large company is like being waterboarded.”
–Paul Graham, Y Combinator
So what do I mean by “the discipline of entrepreneurship,” otherwise known as “entrepreneurial management”? It means as founders we need:
A set of principles and frameworks that are aligned with our passion that help us identify sustainable and repeatable business models, while managing the chaos of scaling through six phases of startup growth.
Wow, that’s a mouthful, eh?
Let me unpack this a bit. At MaRS, I’ve been fortunate to work with over 300 startups in over five years studying why they fail and how we can help them reduce the risk of failure. We’ve rolled this up into a program we call Everest (remember the mountain analogy mentioned earlier?). Based on our discovery, we learned startups who have helpful mentors, practice discovery with customers, track relevant metrics, deploy capital appropriately, utilize lean iteration, have balanced teams, and lastly, are driven by passion…tend to succeed the most in terms of customer growth, capital and revenue. The art of managing this is the discipline of entrepreneurship.
What frameworks, tools and resources help reduce the risk of failure?
At MaRS, and especially in the Everest program, we look at the development of a startup through what we call an Entrepreneurial API. This includes:
- Defining and testing assumptions on a business model canvas (the “North Star” of your startup)
- Getting out of the building and turning those insights (best guesses) into valuable customer insights via customer discovery
- Testing and learning from those insights via a minimum viable product (MVP)
This cycle is otherwise known as a “lean” build, test and measure cycle coined by Steve Blank and Eric Ries. Alexander Osterwalder, who suggests we no longer compete on a “sexy” technology or product, but rather a differentiated, repeatable and scalable business model, developed the canvas.
Beachhead customer segmentation
The next key framework we look at is beachhead customer segmentation, which helps founders identify two to three market segments in which they can excel, establish a strong market position and hopefully obtain a positive cash flow before they run out of resources. A guru in this area is Bill Aulet of MIT who wrote the book, Disciplined Entrepreneurship.
We focus on a set of key criteria to assess beachhead segments via customer discovery, such as the size of the market, the funding of the market segment, their pain or compelling reason to buy, any potential competition that could block the startup, spillover into other market segments and the alignment of the segments to the goals and ambitions of the team.
Team-based tools and frameworks
“Success is going from failure to failure without loss of enthusiasm.”
The next key set of frameworks tools and resources we look at is team-based tools and frameworks. Most notably, we explore Noam Wasserman’s important work as discussed in his book, The Founder’s Dilemmas.
We first help entrepreneurs determine if they should found and with whom—and then we look at what roles, relationships and rewards they should set for the founding team. Next, we talk about founder agreements and key milestones that will help hold the team accountable. We also help connect entrepreneurs with talent to reach those milestones.
A good startup credo to follow via Noam Wasserman is:
“Decide—take responsibility—be humble—never give up—show initiative—laugh—don’t complain—find a solution—keep on—take pride in your work—open your mind—embrace change—collaborate—listen—improve daily—lead, not follow.”
Lean analytics, or innovation accounting
Last, but not least, are the lean analytics your startup will follow to rapidly iterate. This process is also sometimes referred to as innovation accounting. What does innovation accounting mean? According to Eric Ries:
“To improve entrepreneurial outcomes, and to hold entrepreneurs accountable, we need to focus on the boring stuff: how to measure progress, how to set up milestones, how to prioritize work. This requires a new kind of accounting for startups.”
Real and measurable analytics move your business and team forward. When all the data and insights from the customer come in from discovery, the product, and sales and acquisition, it’s important to mull it over weekly, define pass/fail assumptions, build the next MVP and do it all over again the following week. It’s a chaotic process that requires discipline, but hey, you decided to take the leap. This is the reality.
Until we meet, move fast and break things.
Watch portions of Nathan’s E101 lecture
Missed the lecture? Check out the videos below.
What is Entrepreneurial Management?
Entrepreneurial Management: Frameworks and methodologies
Next lecture: Customer Discovery and Market Intelligence
Join us this week as Usha Srinivasan, Vice President, Learning and Insights at MaRS Discovery District, and three of her team analysts explain the importance of customer discovery and market research when you’re crafting your value proposition.