The acronym KISS wasn’t invented for dummies. Keep It Simple Stupid is what you say to smart people who can’t see the obvious. In this instance the obvious looks like this: it’s the two man (or woman) band with barely any resources, pitching me their plans to build the next Oracle or Microsoft and assuring me that what should be a 10-year growth strategy can be executed in Year One.
The enthusiasm is great and if you have the conviction, then go for it. However, if you want to avoid a headache then start small, don’t try to do everything at once and keep it simple.
Here’s a few observations on simplicity:
The media has misguided a lot of entrepreneurs into biting off more than they can chew. Big problems are often complicated, which usually require a lot of capital to solve.
Remember, capital isn’t just cash; it’s people, IP (proprietary knowledge), influence, brand and balance sheet strength for when things go wrong – and believe me, at some stage they will go wrong. Taking on Everest isn’t impossible, but with no training, oxygen or mountain guide, it’s probably not the smartest undertaking. It’s nothing to be ashamed of: if you’re lacking experience or are under-resourced, try addressing a smaller, simpler problem before taking on the summit.
Elon Musk is a great example. One of his first businesses (Zip2) was started with $28k. He then moved onto PayPal and eventually, Tesla and Space X. Obviously the guy had great ambition, but was also aware of financial limitations. He didn’t start with a billion-dollar position. He bootstrapped himself to a point where space travel and solving the world’s energy concerns were within reach.
Look around you – are there players in your market who can replicate your business on a whim? The opportunity to displace a large incumbent is certainly attractive. But be careful. Kerry Packer once asked me ‘where does an 800-pound gorilla defecate?’ to which he answered, ‘wherever the f*** it wants.’ This was sage advice, because the incumbents in my case (the big banks) hit back hard. Your business needs to continuously evolve above or at least in line with competition. If a big incumbent suddenly wants to compete, you may find yourself outgunned and outmatched.
A classic trap for first timers. Too often I see start-ups bolting on additional products, services or even markets around their core offering. I can see the mind-set: create additional revenue streams, and suddenly you’re a more valuable prospect. Incorrect. When you’re an early stage business with limited resources, I want you to concentrate and do one, or possibly two things, really well. Your new ideas may be good, but if they’re not part of your core offering, they should probably go on the back shelf as future growth initiatives. Try to do too much too early and I guarantee you’ll do none of it well.
It won’t favour your business well if I walk out of a pitch scratching my head. Being complicated isn’t firmly a bad thing, but it will narrow your investor base. Peter Lynch ran Fidelity’s Magellan Fund for 13 years and is regarded as one of the all-time great investors. He’s got a few rules to investing, but one rings true in this instance: don’t invest in companies you don’t understand. If your product is complicated to the point of being incomprehensible, convincing investors of value will naturally be more challenging.
I won’t go as far as Peter and say that a ‘fifth grader’ should understand your proposition – but I think if a reasonably educated adult doesn’t get it, there’s probably cause for concern.
I used to drive a Mercedes S Class. At the time it was one of the most advanced cars on the road, having all sorts of features and functionality (a lot of which I never used). The thing I remember most about that car, isn’t how cool the tech was, it’s how often it used to break! The point being, the more moving parts, the higher the probability of failure. Even with 100 years of experience and billions in resources, Mercedes-Benz still sours a portion of its customers with bad user experiences. The difference between them and a start-up is they can afford to fix mistakes and absorb the bad press – a start-up cannot.
MVPs are great, but don’t overload your offering unless you have supreme confidence in the extras’ quality.