Start Small
Anyone who wants to build a successful business (VC-backed or not), should try building a small business first to pay the “ignorance tax”.
It has been almost 5 years since I started Aggregate Intellect. Has been successful or not is a topic of a different post, but the above is the most important lesson I have learned!
I was pleasantly surprised when Omar Zenhom spoke about this in the episode of the “10 dollar MBA” on my daily run today. And I admit, I am stealing the term “ignorance tax” from him because let’s be honest, he’s much more articulate than I am!
One thing that has been a bit of resentment for me during this journey has been how easy second time founders have it. Trust of investors, trust of customers, ability to maneuver in various situations, etc etc. Of course, they worked hard to have those privileges, but always assumed that you have to go through the whole thing and only if you succeed you get to have all the privileges. But what I have learned, esp in the past year or so, is that a lot of the mechanics of a business are common amongst all sorts of businesses. Obviously the nuances and complexity of the details varies wildly, but the basics are the same. My mistake was that I thought that my theoretical understanding of these details was sufficient while reality blew up in my face with 100 layers of complexity at every step. My vague and untested understanding of what it takes to sell and fund the business, what it takes to build a product people want, and what it takes to engage and manage talent needed to be upgraded repeatedly and still so much more to learn.
I think one the things that I regret and kinda are trying to do retroactively is not trying to build a small, low-stake business first, and do it seriously for a while just as a learning experience. I could have learned so much about creating a sustainable business, sales, marketing, accounting, legal, operations, relationship management, and much more in that serious but simulated environment. “Simulated” because my real ambition was to build a big global business and this small “throw away” business would be a means to an end. In other words, I could have paid my “ignorance tax” in that setting, and then started fresh with my actual big idea! It could have even been done along with another full time employment since the goal of it is just learning.
Of course, one small but very important detail is that nothing teaches you how to do a business like running out of money. So, you might argue that well, this “simulated sandbox” doesn’t have that important learning mechanics, but I would argue that if you are conscious of it, you could definitely simulate that mechanics but setting the right set of boundary conditions (eg. you are not allowed to put in more money than whatever you initially devote to the project and it has to be funded by its revenue, etc - essentially treating your savings account as a very critical angel investor).
In my 20-min ama, several folks booked me to talk about raising money from angel investors recently and my advice to all of them has been: don’t! Instead, turn what you have into a consulting business, make money from it, use your learning to iterate, once you are more financially stable ask investors to give you money because nothing gives you leverage like not needing the investment money.
Back to Omar: he suggested these ideas as small businesses one can try: a) service business where you essentially sell your time / expertise for money, b) something that has the leverage of ongoing distribution like self-publishing, marketing, and selling a book, or c) building / packaging something slowly on the side of what you do every day (say software, course, etc) and selling that.
