Noobpreneur.com is thrilled to sit down with Dr. Sean Wise today. Sean is a true witness to the evolution of startups since the dot-com boom, and early VC fundings to the structured startup ecosystems we do now. At the start of his young career at Ernst & Young in 1998, Sean helped launch E&Y’s “Venture Capital Advisory Group,” focusing on the growth strategies for the innovative ventures of seed stage. His notable involvement with the launching of Dragons’ Den (aka Shark Tank) came afterwards at CBC, where Sean served as the online host and blogger for its first five seasons.
Sean has devoted his entire career helping both venture capital industries and startups navigate their ways to maximize innovative potentials of entrepreneurship. Now at Ryerson University, Sean is the professor and partner of the university’s own accelerator program called Ryerson Futures, mentoring hundreds of innovation-focused startups each year.
Overall, the startups under his mentorship have collectively raised more than $2.1 billion in capital. For all of the aforementioned contributions, Sean was named Canada’s National Startup Mentor of the Year in 2014. And his most recent book, Startup Opportunities: Know When To Quit Your Day Job, (which he wrote with co-author Brad Feld), became an Amazon best-seller in the summer of 2017.
Ivan Widjaya (Q): Dr. Wise, let’s start with the new book, why did you (and legendary investor Brad Feld) write the new book?
Dr. Sean Wise (A): Thanks, great to be here. Brad and I wrote the book to answer a question we both get asked a dozen times a week: IS MY STARTUP IDEA ANY GOOD? This question is on the mind of most first time founders and even on the mind of some serial entrepreneurs. But it is the wrong question, or at least it is being asked to the wrong person.
Today, entrepreneurs should be discussing their startup ideas with potential customers, not investors first. Maybe two decades ago, when you needed millions to launch a startup, you needed the blessing (and money) of a venture capitalist. But today with launch costs now dropping below $5,000, you should spend your time with customers not investors.
Q: You are advocating for entrepreneurs to share their startup ideas with customers. Won’t they steal them? What about the Intellectual Property, the IP?
A: Generally the benefits of sharing outweigh the risk of idea theft. After all, it is execution not ideas, that are valued long term. Further, ideas are rarely proprietary. Yes, you may have some secret sauce, or some proprietary intellectual property. If so, then don’t share that. Focus instead on what is publicly known. For example, everyone knows that Google is in the business of search, but few know the proprietary algorithm that drives it. So save the secret stuff, and focus instead on working with customers to test the idea, validate the unmet market need and confirm that your approach to solving that problem resonates with early adopters.
Q: You said earlier, and in the book that the cost to launch a startup has dropped from millions to hundreds of dollars. Why is that? And what does it mean to those thinking about starting a startup?
A: Dr. Sean Wise: It’s simple. During the dot.com boom, there was no Google, no LinkedIn, no Facebook, no Shopify, no Ebay, no Paypal. So if you wanted to launch an online store, you had to not only build great products, you had to know how to code a store, work with merchant accounts, attract customers to the site, etc. Now, after the dot.com boom, after Web 2.0, the infrastructure is in place. Now you could launch a store in an hour and have the same functionality as a store in the late 90’s that cost millions to build.
As for the benefit of this? Well I think it democratizes entrepreneurship. We all can find $5000, but few can access $5 million. So today, the barriers to launching something no longer exist. Combine that with the fact that there are billions now online, and the infrastructure is all in place, and I think you will agree, now is a great time to start a startup.
Q: If founders no longer need investors to get their product to market, what are VC’s now for?
A: Venture Capitalists focus mostly on scale – how to get you from 10,000 users to 10,000,000. How to expand channels and drive growth.
Q: Ok that makes sense. Now the subtitle of your book is “….know when to quit your day job”, so let me ask you, when should you quit your day job?
A: That’s really a personal choice, but for me you should not quit until you have gathered enough third party evidence to justify doing so.
Q: How can first time founders generate such evidence early on while still working full time?
A: The best proof that a startup is worth quitting for, is pre-sales. Think crowdfunding. The best thing about Kickstarter and the other crowdfunding sites, is that customers can buy products in advance for a large discount. All before the product is ready. If thousands sign up and pay for your solution, in advance of actually building it, then you should feel pretty confident about your startup’s potential. With that confidence, you will be able to quit your day job.
Q: So when evaluating a startup opportunity, what do you look for? What do you talk about in the book?
A: Well my co-author and I have collectively seen more than 20,000 startup pitches. When we examine a startup opportunity we look for a variety of things, including but not limited to:
- Is the problem being solved a want or a need?
- Is it a large unmet need? E.g. do lots of people have this problem?
- Does this founder team have the ability to access early adopters?
- Is this team coachable? Can be the team pivot and be agile as is required?
- What evidence can they provide to validate their startup assumptions? E.g. who else believes?
- Who is behind the project? Are they obsessed with the problem they are trying to address?
Q: Last question, what is the worse startup opportunity you have ever been pitched?
A: That’s tough, I spent five seasons of Dragons’ Den listening to some truly wacky startup pitches. I think the worse for me was being pitched a startup that repurposes old Bear Traps into Christmas tree stands. I just couldn’t get past the notion of some child getting their hand lopped off while reaching for their present under that tree.