I was invited to speak as a panellist on the Ivey Entrepreneurs Forum today. It was organized by Miles McDonald (President of the Toronto Alumni Association) and Jeff Szeto . There were six companies presenting from energy to therapeutics and software.
The panel discussions were around finding capital and dealing with growth. The reality is there aren’t many options for seed financing. It is you, your friends and family and may be some angles. VCs don’t play in this early stage and forge the banks. Most early stage venture funds have exited the field, and the remaining funds are those extremely focused one and incubators. VCs ask for traction, it is another word for validations. It includes early prototype, purchase intent from customers or interest from industry. You alone are going to need to make the initial investment in your idea, committing both time and money to get your idea off the ground.
The other key topic of discussions was around growth. I’ve heard people talking about managing fixed and variable costs, dealing with equity and politics and other issues. But many of these things are not unique to start-up alone. Even if you are running a Fortune 500 business units you still have to manage your cost and make sure they don’t get ahead of your revenue growth. That’s just business 101. This is a somewhat irrelevant question. When growth happens, you cannot stop it. You cannot avoid it. It is the best thing that can happen to a start-up. It is about having quality growth, not just top-line revenue, but also bottom-line, capability, organizational maturity and infrastructure.
In any high-performance start-ups, entrepreneurs look ahead and say, "12 months from now, this is exactly the customer and exactly the product, 36 months from how, this is what the industry should look like." They have a good sense of the short and medium term future. Then, they work back from that point in the future to the present, picking the customers who will buy and the subset of that ultimate product that they can actually build.
These entrepreneurs understand both the ultimate mainstream customer and the immediate customer, and they are not confused that the bulk of the orders are going to come from the mainstream customers. In their minds, there is a product road-map. A common mistake is many did not see the evolution from an early product to a mass market product.
On the subject of growth, popular wisdom says companies can somehow grow continuously and forever. Growth can stall and it doesn’t matter how bit or powerful a company is. The struggle of corporate icons like Sony, Kodak and Xerox demonstrate that natural limitations, managerial complexity, disruptive innovations make continuous growth increasingly difficult. Rather than seeking growth at any cost, companies seek alternative ways of moving beyond natural growth limits. They need innovation to sustain growth and continuous renewal. Innovating sometimes might require creation of new corporate forms or make a graceful growth-to-value transition until they embark into the next innovation journey.
