Critical Success Factors for a Start-Up
The Center for Social Enterprise just completed its workshop Building Mission-Related Ventures to Scale. The motivation for this workshop is our belief that the majority of start-up businesses that fail each year are businesses that should not have been started in the first place. Why? Because “build it and they will come” is the worst business approach possible.
Budding entrepreneurs need to accept that it doesn’t matter how great they think their idea is; what matters is how great customers and investors think their idea is. Oftentimes customers and investors are not impressed.
In the angel investment arena, this is best represented by comparing the number of investments an angel group makes and the number of investments it screened. One group in our community, X-Squared Angels, recently reported that, of the 56 investments it screened in 2013, its members chose to invest in only three. In 2014, it was still a low pass-rate: 75 companies were screened and members chose to invest in nine.
An entrepreneur needs the odd blend of optimism (that s/he will succeed) and pessimism (that the product is right and it meets a customer’s “pain points”). This was well-articulated by Jeff Wilkins, best known for founding Compuserve, at a recent Start-Up Week hosted by Chase in Columbus. Here is his list of seven critical success factors. I will let the reader decide what factor each implies, but the key take-away should be that too many entrepreneurs do not consider, never mind address, all seven.
- There is a real market need.
- The market is big enough.
- The business has growth potential.
- Our product works (there is a fit between the product and the market need).
- Our strategy will win.
- The economics make sense.
- Our team can execute.
Before an entrepreneur starts to sell or approaches an angel investor, this is a good set of hurdles to first overcome.
Yours in Linking Mission to Money,
P.S. If you want to see our dynamic list of social enterprises operating in Central Ohio, follow the growth of our Soc Ent Directory. See the progress made in Central Ohio over the last year in our forthcoming State of Social Enterprise in Columbus report.