"You don't need a million dollars to start a company." Explained Steve Barsh, a Partner at DreamIt Ventures, who helps young entrepreneurs build their ideas and companies in the startup accelerator. Their philosophy is simple: "do more with less" while focusing on what matters - building your business and "getting you pointed in the right direction very quickly." The 4 managing partners have experience doing it, too. They've all bootstrapped and sold successful companies. Steve started his first company while graduating from U. of Michigan and managed to sell it owning 100% of the equity.
Falling in a trap:
"Everyone in my mind tries to sell the venture capitalist first and then sell to real customers." If you think about it, the approach is backwards. I've learned that from experience. While skipping classes at Boston College, I spent more time pitching venture capitalists and private investors than actually building a prototype and selling customers. I would say its one of the primary reasons why we didn't succeed.
Avoiding pitfalls as a young entrepreneur:
But, how do you know about these traps and pit falls as a young entrepreneur? They're tough to avoid if your building your first startup and don't have any guidance or experience. DreamIt Ventures understands this and has built its business accelerator with first time, young entrepreneurs in mind.
"What should you focus on? What's the next logical step? What should be the appropriate milestones be? Is the next stage angel investors or venture capitalists? Do you even need that type of money or can you bootstrap for a while?" Amongst many, these are some of the questions that Steve, his partners, and the rest of the mentoring team help entrepreneurs answer and focus on.
Bring in the revenue, then bring in the capital to scale:
For instance, you shouldn't be focusing on venture capital in the beginning..you need to be focusing on your business and SELLING your first customers. You want to be able to go investors afterwards and be able to say "here's my problem: I've got 1 million dollars in revenue today and I can't grow my company fast enough to capitalize on the market opportunity."
"You have assumptions...now lets get rid of them."
Throughout the process, it's important to identify key success factors. "Businesses are usually based on 3 - 7 key assumptions." These can be thought of as lynch pins, if you remove one, the model crumbles. However, assumptions are usually wrong in the beginning, especially with financial models and P+L projections. One of the critical goals at DreamIt Ventures is to ask "How can you turn these assumptions into knowledge as quickly as possible, and then capitalize off of it?"
A simple example - use AB Testing:
I could talk to Steve all day. He had a lot of creative ideas that I had never thought of, and wanted to absorb them all. One of them involved a simple application of AB Testing with Google Adwords:
Create two scenarios with two different marketing messages. For instance, we could advertise College Mogul with two different tag lines that focus on two different interests:
1. Stories of successful young entrepreneurs
2. Advice for for young entreprneurs
Then, run two different campaigns to test the click through rate. You can get a good feeling if one is more popular than the other if one has a higher click through rate. It's not only easy to test assumptions this way, but you can do for a couple of bucks each day. Over a couple of weeks, you'll be able to zero in on interests that people are more interested in and build a better value proposition. It's similar to one my sales tips for startups that examines how you have to constantly be iterating and challenging your pitch in the beginning. It's a process until you can identify the "lynch pins" that resonate the best with your target audience.
AB Testing is simply testing two different hypothesises by comparing them on different metrics, like click through rates.
Mentoring, office space, and experience.
The DreamIt Ventures not only funds you with a few thousand to seed your idea, they provide office space, mentoring, attorneys, accountants, and a speaker series. Every team receives a mentor that has a solid 10 years of experience for guidance that is complimented by a frequent speaker series that focuses on pragmatics, tricks, and advice to avoid traps. The whole goal is "to give entrepreneurs actionable items that they can turn around and immediately use."
Steve Barsh:
"I want people to use up their intellectual capital before they start burning through venture capital."
Apply!
DreamIt Ventures will have about 12 - 15 spaces open for 2009. Its recommended to apply as soon as possible since applicants are accepted on a rolling basis. DreamIt Ventures Applications
Adam Sachs, Co-Founder of Ignighter, offered some advice on applying to incubators and startup accelerators.
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