Note: A version of this post appeared in my semi-regular column on AlleyWatch.
I was judging a speed pitch competition the other night to recruit startups for DreamIt NY’s summer accelerator program when it happened.
After a series of crisp (and not so crisp) one minute pitches, I opened the floor to walk-ins. The last guy to raise his hand stepped up. He began with, “This is just an idea I have.” I smiled a little more broadly and mentally wrote off the next minute of my life.
As it turned out, he had strong domain expertise in a large market with a real problem that was still horribly backward and the problem was amenable to automation. While we do not fund cocktail napkins, it was something that I thought worth his exploring, and was actually looking forward to him coming up to me afterwards for feedback.
When he approached me for advice, he launched into an all too familiar litany that I call, “I need before.”
Him: I need funding before I can build my solution.
Me: Investors generally won’t pay you to build your alpha, but you can start by getting your ideas onto paper by wireframing how you think your solution will work. It will be all wrong, but it will be enough for you to take to potential tech cofounders to begin the discussion.
Him: I need funding to pay a programmer,
At this point, one of the other attendees who had stuck around piped up, “I’d build that for you.” This developer had pitched a different, equally half-baked concept, but he liked the other guy’s idea better. And he had experience in the same industry. Problem solved.
Him: I need funding to pay a lawyer to work through all the regulatory issues.
Me: No, you don’t. Lawyers are trained to say no. They are paid to avoid risk. They are never rewarded for getting a deal done faster or simpler. If you ask, ‘Can I do X?’ they will tell you all the reasons why you can’t. You need to use lawyers correctly. You need to ask instead, ‘I need to do X. How can I do it legally?’ They will tell you all sorts of hoops you need to jump through, but at least you are past the Reflexive No. Now you have to push back on each one of their requirements, starting with the most onerous, and ask, ‘If I do Y instead, what’s my exposure?’ I suppose you could say that you’re looking for the minimally legal product. It is a rare and treasured lawyer who will get you to this point on his own. Most lawyers need to be led to it.
But you may not even need to do that. Are you actually causing users to assume any incremental liability? In this case, your potential customers are already doing this process, albeit manually and poorly. They are already exposed. You are not increasing their exposure and, if anything, you are actually decreasing it. Legal could turn out to be the least of your issues.
Him: I need a working product before I can approach potential customers.
Me: Why? You have connections in the industry. You can show them what you are working on and ask for their input. People love to give advice, and odds are that a lot of what they tell you will be things you intend to build anyway. Then, you can later go back to them and say, ‘I built what you suggested. Now how about being a pilot customer?’ It’s hard for them to claim that your service does not meet their needs when you built exactly what they asked for.
By this time, I sensed that this could go on for a while, so I preempted his next question by saying, “If I can be blunt, your biggest obstacle right now is your mindset. Instead of thinking about all the things you need before you can get to the next step, you need to flip it. You need to think about all the steps that you can take, without any additional resources. You will be surprised to see how far you can go, once you start thinking about it that way. After all, you walked into this room with just an idea, and now you’re standing next to a developer interested in, at least potentially, building it for you. That’s a lot of progress for one night.”
He nodded thoughtfully and slowly smiled. At that point, I knew that he had taken his first, small step to becoming a true entrepreneur.