Recently, there have been numerous reports floating around the internet that are showing the decline of entrepreneurship in the United States, mainly within the technology sector. While these reports may be some cause for alarm, how credible are they really?
Being Vigilant About the Data
In February of 2014, the Ewig Marion Kauffman Foundation published a report stating decline of job creation within the tech sector as a whole. While this information is correct it is important to examine it closely to determine the true conclusion of the report.
Looking back to the mid to late 90s, we saw a huge influx in tech entrepreneurship within the United States. At the time, venture capital money was being dished out at any opportunity to be invested into a hot and rising tech start up. Unfortunately, while many of these businesses had wonderful and genuine ideas, there was no real way to market them and thus now way to generate a profit. A vast majority of these businesses ended up in failure, contributing to the downward trend of these recently released studies.
After all of these failed ventures, many VC firms began to withdraw from investing in new startups as they began to realize that a business plan just wasn’t good enough. They needed some sort of tractive effort from the new business that would guarantee them a profit in the years to follow. So, if venture capital firms are less willing to put the money out there to invest in new tech startups, what is there to do?
What Does all of This Mean for New Tech Startups?
While these reports do have a legitimate reason to call for reduced entrepreneurship they do have underlying messages built into them that we must decipher. These declining rates of entrepreneurship in our industry are coming from one main demon: being unprepared. In essence, having an idea and the willingness to run with it just doesn’t work. It takes more than a business plan to build a million dollar company. Long hours have to be put in, employees have to be brought onto the team and, most importantly, there has to be a product that is marketable. Without a market to unload your wonderful new product to your idea is, sorry to say, utterly useless.
So, How do I Get an Investor Onboard with My Idea?
If you take the customer first approach, and really focus in on what your target market will actually pay for you are already miles ahead of any other startup competition you may have. This mentality changes the company’s orientation into a new model that focuses on efficiency by bringing your product to market faster and easier.
Also, it is important to realize that investors have learned from their mistakes and are now a little more tight with their investments. However, this usually translates into a better investment for you as they guide you through a low-risk process that tends to end up in quicker returns that are worth more in the long run.
Before you even consider speaking with an investor it is extremely important that you analyze the start up from an internal perspective. Do you know how you’re going to make money? Have you actually gone out and spoken to some of your target market to see if they’re interested in your product? Have you made the necessary sacrifices that will ensure your business’s success? If you have answered “no” to any of these questions (they’re just starter questions) you may need to reconsider your product before you decide to seek out an investment as these are certainly questions any investor who expects a profitable return will be asking you, the guy with the ideas.
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