The sugar free truth about catastrophically high start-up failure is that the launch method of choice is the enduring ‘Sommer maar so’ technique. Rather than holding thumbs, consider these two popular and proven launch methodologies that lessen both risk and initial capital.
The Lean Start-up Approach
What is it? A systematic approach to launching a business that reduces start-up failure risk by encouraging multiple test and iteration cycles.
How it works: You don’t wait for product perfection before launching (that’s the fastest route to flop); rather by launching a minimum viable product (MVP), getting customer feedback as soon as possible, implementing that feedback at the speed of light, pivoting if necessary, and then resending to market. Repeat until customers are beating a path to your door for it.
Famous examples include: Almost every garage-to-Silicon Valley giant
Resource: The Lean Startup, by Eric Ries. R295 on Kalahari.com
A Local Case in Point
At 18, Justin Stanford, soon-to-be-founder of 4DI, heads to Cape Town with a car and R1 000 with the aim of starting an Internet security business. A family friend invests R20 000 in his idea, but it’s flawed on many levels:
“It was a great idea, but not a viable business model; I was selling time and a service, making it hard to scale; and it was difficult to monetise.”
It was also pretty hard to get companies to take a kid seriously. So he created an entirely Internet-based company clients could interact with without seeing him; found a Slovak Internet security start-up with great software but a poor user interface; re-worked some of the code; made the software downloadable-only and distributed through re-sellers. The rest, as they say, is history – with a few more tweaks along the way, of course.
The Corridor Principle
What is it? Simply put, the mere act of starting a venture enables you to see other venture opportunities you wouldn’t have seen or taken advantage of beforehand.
How does it work? Imagine yourself at the start of a long corridor with your business idea at the end. As you begin walking you learn new facts about your market, industry, business and your customers that reveal your original business idea either to be unfeasible or that more profitable opportunities lie elsewhere.
Famous examples include: Richard Branson. His first business was a magazine called Student. He then launched a mail order record business, which opened a corridor for Virgin Records which led to the next and the next and the next opportunity.
Resource: Like a Virgin: Secrets They Won’t Teach You at Business School, by Richard Branson. R225 on Kalahari.com
A Local Case In Point
In 1999 Antonio Iozzo and his brother launched their business Mont Blanc Financial Services. As a brokerage service, they wrote enough business on behalf of Santam to apply to become an administrator for the insurance giant earning on both policy commissions and administration fees. Then regulations changed, preventing brokerages from issuing policies, and presenting a brand new business opportunity. The admin division of Mont Blanc broke away to become IUM with Mont Blanc as a customer. Today, the opportunistic spin-off has a turnover of R350 million with liquid funds of R25 million at all times.