I've hesitated to write this post for some time now, primarily because it exposes some hard-truths one encounters when attempting to launch a startup. But I think telling the story of my startup, and our struggles (old and new) could be profoundly helpful to those starting in a similar position (we'll see I guess). Allow me to start at the beginning:
My startup company is product-based. In my mind, this means we're selling a patented (or erm...being-patented-if-we-can-raise-the-money) piece of hardware, to somebody. In our case, that somebody is another business - an original end manufacturer, to be specific. For us, right off the bat, there were no fun surveys to send to friends, or whimsical Kickstarter campaigns to be had. Very soon after our founding, the excitement of having a "cool" or "fun" product idea became a monstrosity of IP licenses, patent-writing, and multi-million-dollar multi-year go-to-market plans which required partnering with multi-million-dollar organizations. Hold on! The Shark Tank made this all look like so much fun, so where did that go?
So now let me focus on three pain points: cost, time and location:
Cost. It's amazing how quickly $100k evaporates into thin air when you need to patent something. In our case, we need to file internationally. Cost estimates (beyond the $20-something thousand we spent for our initial filing in the US) are between $30k and $50k. Beyond that, when you're a product-based company, you need funding for prototypes...and when your product requires testing, you need funding for test equipment...AND when your product requires a lot of design work, you need funding for contracted-engineering help...ANNND don't forget about the certifications of that product on-top of the sales and marketing you'll have to do. Pre-seed funding? POOF! We quickly realized that in order to launch our product, we needed at least $5 big-ones (that's uhm...millions) to get the job done. So much for friends, family, and fools.
Time. When you first come up with a product-concept that you're really excited about (which you should be), it's natural to be eager to launch it and watch the world wonder at your genius. I know some killer software-guys that could probably write an app and have it launched within a week or two (who knows, maybe less). We launched the company in 2011. It's nearly 4 years later, and we've just finished our first real prototype this past summer. Why the long timeline? Well,
1) Funding doesn't always come in when you need it (or plan for it). There have been months gone-by with little progress on the technology simply because we couldn't afford development, or the fund we were expecting to get didn't come through.
2) Sometimes you have to start over (if your voice-of-the-customer-feedback tells you to). We had a pretty big technology-pivot in our second year. After that point, we were literally starting from scratch in terms of our business model and technology. In the end, we're very glad we pivoted, but it comes at the cost of time (and energy....and some tears).
3) You don't have (or can't afford) the full-time rockstar team of engineers it will take. In this case, you move along as a fast as you can with the limited resources you have, but things will take longer.
Point being: the list of top qualities of a success entrepreneur should also include patience (it's rarely listed).
Location. You may be wondering how location fits in with this whole startup-reality-check-thing. For us, location has been a major challenge, and perhaps something we should have recognized earlier-on. A few reasons:
1) Different parts of the country have different industry-focuses and regional goals. We're in a region which has traditionally been an industrial rust-belt. With steel mills and energy giants in the area, the small startup promising to ease the process of integrating battery-based energy systems isn't going to be wildly popular. To further this, the funding focus in the area has recently shifted away from any form of clean-tech (to the extent that some local funds have eliminated our type of technology off of their list of companies funded altogether). On top of being generally "unpopular", we quickly realized that when we went to pitch for local development funds, we were up against two-guys-with-a-Mac that could finish their website and being turning profit with a $25k investment. Our multi-year $5M+ technology commercialization plan was looking pretty risky compared to that. All this being said, there are certain technology-hotspots that we are now uncovering across the country (and in some cases, overseas) - the trick is to be poised and positioned to make a move when necessary.
Often overlooked, I'm convinced that the location of your startup, and the surrounding industry can make it or break it.
Conclusion? The upside to a product-based startup can be massive, but it needs to be approached with the right mind-set and preparation. Don't let the Shark Tank fool you!