I posted on Up and Running yesterday about a Forbes.com piece called Is Your Great Idea a Real Business?. It’s a useful piece, well written, with a good list of six questions. The questions ask about value proposition, market, costs, commitment, and other factors like those. However, it’s built around an underlying assumption that bothers me. I didn’t get into that on that other blog, but it left me wanting to address that other issue here, on this blog.
So what bothers me is the assumption that you aren’t somehow “real” unless you “get funding;” meaning, in context, outside investment. A business isn’t necessarily a business opportunity.
And I don’t want to single out that one piece, its author, or its sources. It’s just that I don’t want people to dismiss, automatically, the bootstrapped startup. To take one rather well-publicized example, is truemors.com (acquired by Kauffman Foundation) not real because (as founder Guy Kawasaki has been so quick to acknowledge) there was no outside investment; nobody got funding? And it’s hardly the only example. Web 2.0 is full of them. What about those successful blogs that grew organically, in the beginning, without funding? What about all the professional service businesses; they aren’t real either? And that reminds me, I was there (on the board) as Borland International went from zero to IPO in less than four years without outside funding. That was pretty real.
I understand that to teach business, and entrepreneurship, we have to focus on the high end, which of course is the rarefied air of venture capital and angel investors. You don’t teach literature by focusing on trash novels, or art by looking at dogs playing poker, so if you’re going to teach about ventures and startups you should teach the business plan and the funding process. That means market analysis, value propositions, investment offerings, pitches, exit strategies, and return on investment.
However, when we’re talking about business in general, let’s give bootstrapping its due. There is a lot to be said for managing to get it going on its own power, scraping a lot at the beginning of course, but eventually building a business that doesn’t depend on the big investment. At the far end of that rainbow, there’s owning the business by yourself, without having to deal with (so-called) outsiders.
And those two reminders prompted me to look again for a study I saw last year. I found it as a Wells Fargo News Release from 2006. A Wells Fargo/Gallup study found that small business owners use an average of only $10,000 to start their business. Don’t you think it’s real, or at least a lot of those are real, whether or not they “got funded?” I do.
Gazelles, Cheetahs and Traditional Small Businesses
High growth small businesses are often referred to as gazelles or cheetahs. These firms attract venture capital, grow very rapidly and hire lots of people. They are very innovative. Google and Facebook are gazelles, as were eBay and Yahoo before