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Start-up Advice

3 Tips For Starting A Company In An Unfamiliar Industry

Launching a company within an industry you know nothing about? (Like Elon Musk did). No, you’re not crazy.

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Elon Musk

Launching a company within an industry you know nothing about isn’t impossible; nor is it necessarily an unwise move. In fact, your ignorance can be a blessing as well as a burden.

Just look at Elon Musk, who has started an array of companies in disparate industries – beginning with PayPal and continuing with SpaceX, Tesla and other ventures. With a background in fintech, economics and physics, Musk is thriving in the space exploration industry.

So, if a big name like Musk as well as countless other, lesser-known entrepreneurs have been able to successfully take on a new industry with only an idea and a lot of determination, why couldn’t I? I reasoned back when I first entered the video production industry. In actuality, I encountered obstacles as soon as I started.

Yet I’d still argue that market illiteracy can be beneficial. It sounds ironic, perhaps, but existing in blissful but enthusiastic ignorance can help you approach problems because you have no preconceived notions about their solutions. Instead, you’re coming from a fresh perspective and are likely unfamiliar with the giant challenges looming ahead

When that happens, those challenges can’t (and don’t) scare you.

Today’s struggles help you develop tomorrow’s strengths

When I entered the video production industry, I encountered plenty of naysayers who seemed to be stuck in the late 1990s, when film equipment was more expensive and less accessible, making video content harder to create.

My dream was to help companies meet consumers’ insatiable demand for video by making the production process cheaper and more efficient.

Starting a business, even in an industry you know well, is never easy. If you’re jumping into a brand-new market, things can seem downright impossible. What’s worse, I had to look past industry veterans who felt threatened by my approach and told me I didn’t know what I was doing.

Look – I’m not Elon Musk, and neither are you, but as my experience proves, you don’t have to be. While I didn’t know much about producing video content, I knew my vision was achievable. Today, Lemonlight is the company I dreamed it could be.

So, based on my experience, if you too are ready to leap into a new industry, here are three ways to set yourself up for success:

Ignorance can be bliss

1Ignorance can be bliss, but be careful with those assumptions

Before I launched Lemonlight, I conducted research to understand the market. And I probably spent more time at this task than many of my more established competitors.

Nonetheless, I still made poor assumptions. For example, I assumed it would be easy to hire freelancers to shoot video all around the country. Right? Wrong. I quickly learned that freelancers have their own styles and agendas and that it takes a lot of work to find the great ones. Thus, many of those we worked with early on were, frankly, unqualified.

I also ran into unforeseen expenses, such as a $40,000 server or payroll for media managers to move footage around internally. These costs added up fast. To compound that, I struggled with pricing early on since I really didn’t know how much it would cost to make the product.

My experience mirrors that of Raaja Nemani and Aaron Firestein, founders of the shoe company Bucketfeet. Firestein knew how to decorate sneakers, but neither had any experience in shoe manufacturing or managing inventory.

Failing to think things through properly led to a few big missteps for Nemani and Firestein early on: They once had a huge shipment of sneakers delivered not to a warehouse loading dock, but to their own house. They had mistakenly assumed it would be no big deal to unload 2,600 pairs into their garage. With a little (paid) help from the delivery man and a few friends, however, they made it work; today, Bucketfeet has sold nearly 500,000 pairs of sneakers.

2Balance your fresh perspective with expert experience

While it’s important to maintain your can-do rookie outlook, it’s also critical to bolster it with the advice of industry insiders who have domain experience.

Like me – and all entrepreneurs – you’ll inevitably be forced to learn some tough lessons quickly. Don’t let that discourage you. When CAN Capital’s Small Business Health Index surveyed small business owners about their expectations for the upcoming year, 64 percent of those surveyed anticipated growth.

When I started Lemonlight, I often took solace in the fact that, with no customers, growth was the only option. You, too, should have a growth mindset.

If you don’t have the capacity to stay optimistic, observe others who do and reach out to them. You’ll often find them running other businesses.

After bringing on a co-founder with a background in film, I needed a while to reconcile his expectations about high-quality video content with my dream of providing it at unprecedented low prices. I wanted to sell all of our videos for $500, for example, and we managed to do that for a while!

Still, my co-founder would constantly remind me that we couldn’t hire the right teams for so little money. Without them, our business would go under. So, working in tandem, we two slowly raised our prices until we found a price point that made sense for us and for our customers.

3Resist and persist: Be open without conforming

You’ll definitely need expert advice, but that doesn’t mean you should always act on it.

Jeff Kear, the founder of Planning Pod, said the worst business advice he ever received came from another start-up founder: That founder told Kear that he must secure outside angel or venture capitalist funding if he ever hoped to be taken seriously and get off the ground.

Deciding to go it alone and bootstrap his business instead of heeding that advice, Kear ultimately built a company that serves more than 1 200 customers and upwards of 20 000 users. Planning Pod has been in the black since its fourth month.

It’s important to consider the feedback and ideas of people who have been in your industry for a long time; however, you don’t always have to agree with them. Typically, those who possess the mindset that created an industry aren’t going to disrupt that industry. Be gracious when having tough conversations with industry veterans, but remember that it’s okay to challenge anyone and everyone around you if it’s going to move you forward.

As an entrepreneur in a new industry or one you’re deeply familiar with, you’re going to run into challenges, setbacks and failures. Don’t let them stop you.

By staying your own unique course, you can learn your own lessons, turn your vision into a reality, achieve your goals and live your wildest dreams – just like Elon and me.

This article was originally posted here on Entrepreneur.com.

Hope Horner is CEO and founder of Lemonlight, a video production company that produces and distributes branded video content at scale. Horner is a three-time entrepreneur who has been featured in Inc. magazine, on KABC and Extra and in other publications highlighting her successes in the Silicon Beach community over the past decade.

Start-up Advice

Entrepreneurs! Do You Know What Your Customers Want?

Take off those rose-tinted spectacles and start looking at your business the way your customers do.

Chris Ogden

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Do you know what your customer’s need? Have you really looked at their problems and challenges and asked yourself how your product or solution helps solve them? Do you even know if your business addresses any one of the myriad pain points they face every day in their personal and professional lives? If your business talks to other businesses, are you speaking in the language they want to hear? If you don’t answer a definitive YES to every one of these questions, then you need to start paying attention…

Put in the effort

Research, research, research. Find out what people need through all the myriad of digital and physical research channels available to you. And when you engage with your customers in person, ask them questions and write those insights down. Listen.

Related: 5 Reasons Why Your Business Is Losing Customers

Bad feedback is great feedback

If clients are unhappy, they talk to you. This is good news. Use this feedback to build solutions that change these issues into advantages. This is when you should consider building an open feedback loop or mechanism into your business to ensure that you are getting the best possible insights from your customers. I

It’s also a good idea to check their criticism against reality before you spend thousands on fixing a problem that doesn’t really exist. For example, if they complain about poor customer care, assess your process and see how many complaints you have. It may be that one customer happened to deal with that one unhappy employee.

Understand their business

Your client has their own clients who have their own clients, and so on, and so forth. Take the time to get to know their business and their market. Often entrepreneurs don’t get to know how their client’s businesses work and they miss a crucial trick. By spending time with them and listening to them you get to understand their pain points and their needs. This way you can be the one who helps to fix their problems properly.

Related: How Well Do You Really Know Your Customers?

Don’t stop innovating

Don’t fear the ability to change something to suit a client’s needs. Your products and services have to evolve constantly as your market and consumers are changing constantly. You need to add value, change features or adjust your services dependent on the business you are in. Pay attention and innovate.

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Start-up Advice

Why Failing Is A Necessity Proven To Guarantee Success

We should always have this at the back of our minds whenever we have that nudge to give up on our dreams.

Matthew Mordi

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There comes a time, especially after a terrible defeat, when we feel like giving up or even quitting. The defeat clouds our minds and make us forget completely what victory feels like. We forget the successes and judge ourselves solely on the defeats. This feeling isn’t unique to a single individual as even the most successful businessmen, inventors, politicians, world leaders have experienced failures at different points in their lives.

We all love success stories. It’s a matter of fact that behind every success story is a large amount of failed attempts. The notion of overnight success is a myth. It took the Wright brothers between four and seven years of scientific experimentation and several failed attempts before their maiden flight covering a distance of 852 feet which lasted a mere 59 seconds was achieved.

History is replete with instances of individuals who were written off after a terrible fall from grace. These individuals, against all odds, didn’t give up.

Related: Having The Perfect Product Isn’t Enough To Keep You In Business

Tiger Woods, for example, has for the most part of his adult life being in the public eyes. That’s why when he went to his very public divorce, tales of womanising, dabbling with prescription drugs. Also plagued by injuries, his golf was seriously failing and in danger of being a “has been,” analysts advised he should just retire. It was obvious Tiger had a different plan up his claws by winning his first PGA tournament in five years.

His recent resurgence in form is testament to the fact that no one has the stop button to our life or life’s dreams and ambition. No one but you. It’s only when we stop innovating and trying that we’ve failed. Having lost a business deal that had the chance to change our lives positively forever isn’t the end of the world. Hence we need to reinvent and innovate.

If achieving success was easy, the vast majority of people would be successful. We have to put in the work and our skill to be able to achieve success because the most worthwhile things don’t come easy.

Defeats, if seen from a positive perspective, bring out the best in us. Victories don’t. Victories swell our egos, fill us with the air of invisibility, and this is dangerous. Hence we need a large dose of failures and defeats to bring us down to earth, to make us learn and better appreciate success the moment we’re able to achieve it.

What then do we do when we experience a poor run of defeats that make us doubt our abilities. Being fixated on the defeats for one, isn’t the solution. It has the tendency of making us forget what it felt like to win and totally derail us from our set goals. This, in itself, is a problem as it may lead to a state of unhappiness.

Related: Why Small Businesses Are Unable To Pay Staff Salaries

The bad results we might have experienced isn’t an indication of our inabilities, it’s an opportunity for us to look at the venture from a different perspective and take necessary action to improve or try a different approach towards achieving our aim.

Defeats can be depressing when we have dependents who rely on us for guidance and in some cases sustenance. Dependents could be in the form of a spouse, children, wards, parents, even staff. The pressure can be enough reason for some to give up and settle for the safer option.

With the decision to settle comes the likelihood of regret which may be more depressing than the expectations of dependents. Fortune they say favours the brave and nothing worthwhile was ever achieved without the possibility of failure.

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Start-up Advice

Why You Need Smart Legal Foundations For Your Start-up

The legal background to a start-up might not be the most exciting area for an entrepreneur, but it’s your foundation for growth. Are you aware of everything you need to have in place?

Kyle Torrington

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One of the best parts of what we do is helping start-ups — the right legal foundations can mean the difference between a start-up that’s geared for scale, and one that needs to retroactively put agreements, checks and balances in place. If you’re aiming for growth, you want to get these foundations right from the get-go.

When Benji Coetzee launched EmptyTrips, a hot up-and-coming start-up 16 months ago, Legal Legends was on the ground floor with her. Although your start-up trajectory may not be identical to that of EmptyTrips, many of the foundational principles canvassed in this article will apply at some point in the lifecycle of your business. They highlight what you should be thinking of from the word go.

Laying the right legal foundation

By the time we were introduced to EmptyTrips, they had already registered their entity as a company and had started to prepare for their first beta public launch in April 2017. When our dealings with the start-up began, the business had already enjoyed a quick and accelerated cycle.

As with all start-ups, the founders had a clear vision and objectives. Unlike too many start-ups however, Benji understood how important the right legal foundations would be, particularly as the business matured and required different support structures.

The following three actions are a good example of the legal foundations all businesses should consider, particularly if growth is a part of the founder’s vision:

1. Why you need trademark protection

Given that EmptyTrips is a digital solution, with limited physical assets, protecting intellectual property as ‘soft’ assets was critical to its differentiation and valuation given the recognition of brand value over time.

At first, we set out to ensure that EmptyTrips’ marketing materials and properties, such as company name, slogan, and product names were protected sufficiently from use by others. This was done by filing for various trademark registrations.

A trademark is a sign or symbol that is unique to your business, and which distinguishes it from other businesses. The most common forms of trademarks are business names, product names, logos and slogans.

By registering a trademark you are granted exclusivity over the use of the name, slogan or logo, and may prevent others from using similar names, slogans or logos in their business in the future.

Related: [PODCAST] Benji Coetzee, Founder & CEO Of Empty Trips – How To Disrupt A $8 Trillion Logistics Industry

When it came to EmptyTrips, they had already filed a trademark for their business name, so we focused on protecting the names of the different service offerings on the business’s platform as the solution evolved and pivoted. These included Trip Exchange; Freight Open Exchange; SureFox and RailFox. As the business grows and product lines are added, we will continue to update this list.

2. The importance of website legal documents

EmptyTrips is predominately an online marketplace solution to enterprises. It is a digital transport brokering agency that has been developed to source, match and market available transport capacity (empty space on trucks, trains, vessels and so on) to commercial freight with on-demand supporting financial products (insurance etc).

Our next task was to prepare the documents that would govern the relationship between EmptyTrips, its users and service providers. These documents, as with most websites, consist of both a terms of service and privacy policy.

Each company’s Terms of Service will be unique to that business, market and customers, but privacy policies are universally required by law.

A privacy policy is a written document available for all users to inspect on your website and which they are required to agree to. It sets out the different kinds of personal information that you collect, coupled with how you store that information, and what you do with it. A privacy policy is required by the Protection of Personal Information (POPI) Act No 4 of 2013, and the General Data Protection Regulation (GDPR) (EU) 2016/679 if you are collecting personal information from European citizens.

In the case of EmptyTrips, their pick up and drop off address, business information to cater for the pick-up and drop-off of goods by carriers, personal information such as the name of the carrier, and payment details, need to be recorded in the privacy policy. In addition, certain elements of the information, such as pick up and drop off locations being shared with potential transporters, need to be mentioned.

If you do not have a privacy policy in place on your website, Legal Legends has a cheap automated version available at the following link if you would like to order one: www.legallegends.co.za

3. The legal frame work around outside investment

Like many high-growth starts-ups, Benji and her team reached a point where outside investment was needed. This is an area where your legal partner is key. Apart from attending to various due diligence meetings and ensuring proper governance controls, we were tasked with ensuring that the contracts for external investment were prepared in a manner that sufficiently protected the interests of EmptyTrips and its founding members.

It’s common during a seed or series A round of funding for an investor to present the start-up with a term sheet detailing the nature or basis of the intention and extent of their investment, as well as all the terms relating to the governance of the company that they would like to put in place.

In this case, the institutional investor presented EmptyTrips with a term sheet that detailed the monetary investment that the investor would provide over a number of years, the monthly draw-downs of the investment that EmptyTrips would be entitled to, the number of shares that the investor would be issued for their investment, as well as the manner in which the governance of the company would be changed in order to protect their investment.

Often, and this applied to EmptyTrips, the terms contained in the term sheet require a new shareholders’ agreement and/or memorandum of incorporation in order to protect the interests of the minority shareholder (the investor).

A shareholders’ agreement governs the relationship between the shareholders of the company and their ability to administer the company.

A memorandum of incorporation governs the relationship between directors, shareholders, prescribed officers and the company.  A standard memorandum of incorporation is issued when a company is registered, but it will often need to be amended at a later stage if, for example, measures to protect the minority shareholders are introduced.

A memorandum of incorporation can regulate the same aspects as a shareholders’ agreement, however, the main difference is that it is a public document available for inspection by anyone, whilst a shareholders’ agreement is a private document.

In addition, if there is any conflict between a shareholders’ agreement and a memorandum of incorporation, the shareholders’ agreement will not apply and will be voided to the extent of its inconsistency.  This often means, as was the case with EmptyTrips, that certain aspects of the shareholders’ agreement that provided for protection of the investor required a redraft of the memorandum of incorporation so that the two documents were aligned.

A shareholders’ agreement might not be enforceable until a memorandum of incorporation has been aligned with it.

Read next: 5 Lessons From The Legal Legends On Pivoting

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