When I was in business school the conventional wisdom was to do a bunch of research before you actually start a company – business plans, market studies, competitive analysis, etc, etc. The assumptions were that A) extensive research would reduce the risk inherent in your idea, and B) that the cost of doing so was time and money well spent.
These days neither of those assumptions are actually true. Here’s why:
- First of all, the cost of starting has fallen through the floor, so by comparison it’s actually cheaper to spend time building and testing than (exhaustively) researching. Social media can get you testers and trial customers so cheaply, your research can actually be your launch.
- These days the world moves SO FAST, that by the time you complete your research it will mostly be out of date.
- No matter how thoroughly you work, research won’t compare to what you learn from making actual market contact with actual customers and an actual product, especially if your idea (like most ideas these days) is something that people haven’t seen before. Until a customer is actually sitting down with your product, odds are good that they can’t accurately gauge how they would react to it anyway (Steve Jobs knew this). In my experience, entrepreneurs can almost always pitch concepts to customers to make them sound compelling; that’s nowhere near the same thing as asking someone to actually buy what you’ve got.
- Good seed stage investors know your research/plan is really nothing more than a guess. What they want to see is that you know what you don’t know, but that you have a plan to figure that stuff out. Identify the unknowns that would have the biggest negative impact on your idea, then devise tests to reduce or remove those risks. You’ll never eliminate risk completely, and you don’t have time to worry about everything all at once. Focus on the risks that could kill you.
- Remember one of the first rules of entrepreneurship: rest assured that any idea you have has already occurred to 100 other people, and ten of them are actually doing something about it. While you’re preparing, your competitors could be out there gaining traction and learning first-hand what the market actually wants.
- And finally, remember another key rule of entrepreneurship: fail fast. If your product is wrong, you need to know how and why as soon as possible, and either fix it or go do something else. In most cases, research won’t tell you the answers, it will only tell you the questions.
Oh, and don’t forget to recruit a kickass team. The myth of the solo entrepreneur is all-pervasive, but no matter how good you are, you can’t do it all by yourself.
