To launch a startup, you need to be a bit of a scientist.
When my partners and I launched our for-equity business incubator, we assembled an elite team of advisers. We had C-suite consultants from Fortune 50 companies, and our in-house lecturer was one of the most respected business professors in the metro area.
Basically, we built a business school for the startups we were mentoring. Sounds great, right? It wasn’t. And it took us six months to realize that was exactly the wrong thing to do.
That’s because businesses and startups are two distinct things.
A startup is the search for a business model. Being a business means you’re implementing a business model.
This is a subtle, but critical difference. Think of the biggest, most successful company you know. The people who run the business are more than awesome at their jobs because they actually know what their jobs are. They’ve studied and tweaked their products and services to perfection. They know what price their customers want, they know where to build locations, they know what types of employees work best in what settings—they borderline know it all.
Startups are the opposite of this. Yes, they strive to be the next billion-dollar company, but to get there, they have to start with a different mentality.
A startup’s business model is nothing more than a series of guesses. Startups guess they know the price threshold. They guess they know the distribution channels. They guess they know their customer acquisition costs. But they don’t know anything.
A disciplined startup’s job is to systematically test all these assumptions. When an assumption is validated as being right, it stays (and is built upon). When an assumption is invalidated—whether that involves the copy on the website or the business model itself—it must be tweaked until it’s correct.
Put yourself in the shoes of a scientist who’s trying to prove a hypothesis, one that could change the world. Do you think she says, “I’m gonna spend as much money and time as possible on this experiment to get to my answer”? Of course not.
She instead builds out the smallest, fastest, cheapest experiments that she possibly can in order to get what she wants. What she wants isn’t a grand experiment. She just wants the answers. Startups need to be doing the same thing: cheap, fast, dirty experiments that get to the bottom of the underlying assumptions that they have.
Back to our incubator.
We found new professors and new mentors. We revamped the entire curriculum, and changed the rubric that judges the incoming applicants. Instead of a business school, we became a lab. A lab where our startup entrepreneurs could run their experiments and transform their hypotheses into data-driven facts.
What we learned—and what seems obvious now—is that startups are not just smaller versions of big businesses. The more uncertain an opportunity, the more its leader needs to act like a scientist than a business owner.
Weston Bergmann is a startup investor and one of the leaders of BetaBlox, an early-stage, for-equity business incubator in Kansas City. His platform has earned him equity in about 100 startups.
www.betablox.com
