Business plans, good ideas, and 8 other myths about startups – by Indiegogo's CEO
Slava Rubin explains what you really need to know
"We have the ability to be an entrepreneur beaten out of us," explained the CEO of funding site Indiegogo Slava Rubin, in front of a big picture of a kettle.
Rubin was giving the closing keynote at this week's Vator Splash in Oakland – his backyard, he told us. "I turned down South by Southwest, but Oakland? Yes to Oakland."
The picture of the kettle is to illustrate an interesting but fundamentally flawed idea: that we have the desire to test out things and keep an open mind beaten out of us as we grow up. Your mom always tells you not to touch the kettle because it will be hot. But as a kid, you touch it anyway, just to be sure.
The analogy kinda breaks down there. If being an entrepreneur was about ignoring good advice, you wouldn't go far, and there would be a lot of people with burnt fingers. The main drive of Rubin's talk took a similar line between making you think, and hoping you didn't think too much.
And it was: the 10 myths of startups. Ten things we believe to be true, but aren't.
1. Myth: It's all about the idea
"Ideas are a dime a dozen," Rubin argued. "It's not like Howard Schultz [CEO of Starbucks] was the first person to come up with the idea of a coffee shop." Instead, it is all in the execution of the idea.
2. Myth: Go for the biggest market
Rubin argues that figuring out how to get 100 per cent of a smaller market is going to put you in a better place than aiming to grab one per cent of a huge market.
This advice was directly contradicted during an earlier Vator Splash talk where someone pointed out that it takes the same amount of energy and effort to create a company in a big market as a small market – so go for the big market.
3. Myth: You need lots of money
The average small business starts with just $6,500; Facebook started with $21,000, according to Rubin. If you decide you need tons of money before you start building your business, you'll never make it happen, he argued.
This is a more nuanced point, of course. There is a whole myth itself build around the idea of bootstrapping – running a business at super low cost until you hit the big time.
The reality of that, though, is that lots of people have to work for free, and have others supporting them while they do that. If you manage to find a product and a scalable business model, you are going nowhere at all without money for staff, advertising, prototyping and, you know, everything.
4. Myth: You need a business plan
By this, he was specifically referring to a "90-page plan outlining everything." Instead he suggests that having a one-page plan to guide strategy is a good idea. This is, of course, utter nonsense. But the broader point is that obsessing over a business plan, or developing a fantasy business on paper, and expecting it to happen in the real world will never happen.
He did bring up a good quote from Mike Tyson. Before Tyson went into the ring with Michael Spinks in 1988, Spinks was expected to kick his ass because he had a thought-out plan against Iron Mike – just like Muhammad Ali and his "dope-on-a-rope" strategy that beat George Foreman in 1974.
When Tyson was interviewed after knocking Spinks out in just 91 seconds, he told the interviewer: "Everyone has a plan until they get punched in the face."
5. Myth: Make sure you have a good brand and PR strategy right away
In reality, Rubin says, the companies that expect glowing press are those that are "product obsessed." In other words, good PR comes when you have something worth crowing about, not the other way around.
6. Myth: Hire people like you
Don't do it, according to Rubin, showing a slide of lots of identical white males. But then, let's be honest, starting a company requires people that are very similar to you. Young, highly focused on business, lots of free time, an ability to support yourself. Did he mean just sex and skin color? We're calling BS on this one.
7. Myth: Values and culture don't matter in the beginning
If you set an arbitrary line at which you will start thinking about a company's values and culture, you are kidding yourself, says Rubin. Except, does anyone actually do that? This myth is a myth, we would argue. Maybe this presentation should have been the top five myths.
8. Myth: Profit, power or fame can drive your through the tough times
We're not sure about this one either, but the counterpoint to it was almost worth the non-sequitur title: that the only thing that can drive you is passion.
9. Myth: Entrepreneurship is linear
Hang on: when did anyone say entrepreneurship was linear? Everyone is always talking about how starting up a business is a by-the-seat-of-your-pants undertaking. Rubin went off on an Inception tangent here about the limitations of gravity and connecting your fantasy of your business with the real world.
But fortunately, he managed to pull it all back with the last point:
10. Myth: Mom will never understand what you do
Rubin says that for three years he and his co-founders didn't get paid on Indiegogo. This kinda goes back to the "hire people like you" so-called myths. There are few people in the world who are actually able to not be paid for three years and get by.
But let's ignore that. His mom had no idea what he did in his previous job as a strategic consultant, and she had no idea what he was doing with Indiegogo. The only thing she was worried about was that he had health insurance – which, like the hot kettle, is actually really smart advice but, again, not something a 20-something has to worry about.
But she did understand – at least in part – what he did when she learned about Karen Klein. Karen was a 68-year-old bus monitor who was verbally abused by middle-school kids in New York. The kids filmed the abuse and posted a 10-minute video online, calling it "Making the Bus Monitor Cry."
One guy who saw it, Max Sidorov, was so affected he set up an Indiegogo challenge. He wrote: "She doesn't earn nearly enough ($15,506) to deal with some of the trash she is surrounded by. Lets give her something she will never forget, a vacation of a lifetime!" He set a $5,000 funding goal.
It took in $703,168 in just one month as over 30,000 people contributed to the fund – just over $20 a head.
Rubin's mom heard about this, and asked her son if he had. "Yes, mom," he told her. "That was on Indiegogo." "No," she told him, "it was on the internet. Everyone at work was talking about it." "Yes, mum, Indiegogo is on the internet – this was on Indiegogo."
She paused and told him: "I like Indiegogo."
It was a touching tale. Worth contorting the myth idea to tell. And a fun talk, if logically flawed in places.
Karen Klein put $100,000 of the money she eventually received into an anti-bullying foundation. And then retired with a very nice nest egg.
Indiegogo made just under $30,000 in fees from the whole thing, but best of all, it won priceless PR as the story was picked up all over the media. See myth five. ®