This is posted over on LinkedIn Pulse.
I was lucky enough to be part of a young, small business in the days before the word startup became ubiquitous for the new entrepreneur. Hyperspace Cowgirls was a video game development company focused on the niche market of children’s (and primarily girl’s) games. I lucked into my role because I had a background in video editing and theatre that was applicable to a game they were making for Mary Kate and Ashley Olson. They needed someone with experience in green screen to help conceive of and direct a video shoot of the twins doing a series of dance routines for a game called Dance Party of the Century. I fit the bill and ended up being part of a team responsible for making games for Acclaim, Mattel, Simon and Schuster Interactive, Cablevision, and THQ and for brands/properties such as Cheerios, Britney Spears, Christina Aguilera, Stuart Little, and Cablevision. It was a fun, intense ride working with amazing people. The company was well run and focused on a market that had unmet demand, but only a year after I left, it shuttered its doors. I was surprised and disappointed that it came to an end, but sixteen years later, I can see why it may not have survived the boom and bust of those times.
My reflections on the brief life of Hyperspace Cowgirls made me curious to see if my observations of what happened still held true. To validate these, I spoke with a few friends and former colleagues who have started their own companies and, while there is no single recipe for success, there are some consistent themes that surfaced. I’ve drawn these together in a list of questions that you should ask yourself before deciding to start your own company:
Are you passionate (and knowledgeable) about the focus of your new business?
If you are going to start your own business you need to be driven by enough passion to persevere when things inevitably become challenging. Without a deep belief in what you are doing, you’ll never succeed. That passion also needs to be partnered with expertise to turn your enthusiasm into something truly remarkable (and profitable). The combination of passion and knowledge is a powerful antidote to the threats that your business will face from competitors, unexpected changes in the market, and operational struggles. It is your passion, at the end of the day, that will encourage you to take the extra effort to make your business succeed. Without it, starting your own business will probably lead to disappointment. For Mark Jarecke, one of the founders of FOUR32C, the desire to keep control over a team that was passionate about the work they make was part of why he left his job as Creative Director of CondéNet (the digital arm of power house published Condé Nast). Mark says:
“CondéNet was managed like a startup. Condé Nast wasn’t really involved with us at all. It was a lot of fun and we had a long leash to be adventurous. But then things began to change and I saw the writing on the wall. Condé Nast got it that they were missing out on digital and CondéNet shouldn’t own that medium. I had a team of 17 graphic designers, user experience designers, photo editors and photographers and I knew it was all going to end. This great team was going to be picked apart and I didn’t want to watch it happen. So I left to start FOUR32C. I wanted to recreate that dynamic, amazing team without the fear that it could be all taken away by politics.”
At Hyperspace, we had passion in spades, but we were all learning as we went. I had never made a project plan and wasn’t an expert in managing people when I started. I was lucky that the environment allowed me to explore and grow, but we were pretty scrappy. In hindsight, we should have brought in more experts earlier on to help us understand the nuances of the space we were entering. But still, passion fueled the company while we built our expertise and it worked for a while.
(For more about the importance of passion to your work (and your health) check out this article from Fast Company.)
What are you offering that is unique in your sector and is it needed now?
Lately, it seems like everyone thinks they have the latest, greatest, idea for an App. In reality, less than 1% of APPS are successful. That is a daunting statistic that underlines how few startups do their homework. The truth is that differentiation is key when starting a new business. What is unique about your travel App? How is your delivery service better than what’s already out there? What makes your agency model better? I have seen many new companies started whose offering is not clearly differentiated from the competition. Hyperspace Cowgirls was brilliant in this area: the offering was totally unique as no one was really paying attention to the fact that girls liked to play games just as much as boys. Having something unique to offer is important, but so is timing. The problem for Hyperspace was that we were too far ahead of our time in this area. While we were offering something unique, the market wasn’t quite mature enough for us to be successful.
Back in 2007, I was part of a pitch team that tried to convince HBO to stream its videos online. We were told in the process that we were pretty much crazy as HBO would never break its model of paid cable subscriptions. Little did HBO know that the same year they turned down our proposal to include a streaming as part of their offer, Razorfish, the agency where I worked, was helping to develop and launch HULU. For NBC, AOL, Yahoo, Comcast, and Myspace, 2007 was the year of streaming. For HBO, it was an idea ahead of its time. Only three years later, things shifted dramatically and HBO launched HBO GO, a highly successful streaming service for subscribers akin to what we pitched back in 2007. This year, it finally launched the stand alone service HBO NOW, allowing cable cutters access to its premium service. So, the right idea may not also be right for your sector, or your company, right now.
For the founders of the Vancouver agency Modern Craft, they see their business model as the thing that is unique and timely. Co-founder Randy Siu says:
“In an era of increased specialization, we saw a gap forming — one that we believed we were uniquely well-placed to fill. Specifically, we saw an emerging need for a strategic partner, grounded in both brand and technology, that could help modern marketing leaders connect the dots across a growing array of channels, methods and tools. … After many years of working with big clients such as Starbucks, Nike, Microsoft, Bacardi, lululemon, P&G etc., we had learned a thing or two about how successful companies have adapted and transformed themselves for the age of digital disruption. The three of us had built our careers helping these organizations do the right things (and not do the wrong things) in digital. Together — with our overlapping expertise across brand, business and technology — we believed we could bring unique value to marketers who are hungry and intent on change. This, we decided, was the work we want to be doing.”
Sometimes what is unique about your business might not be the product itself, but the approach you take. There are a lot of agencies out there and, on the surface, many of them offer the same things. But the product is always influenced by the culture it comes from. For Dennis Plucinik, co-founder of NYC-based agency ATTCK the best thing about creating his own agency has been the ability to shape the agency in his own image. He says,
“Your company culture is your own personality and values, amplified.”
For Dennis, and many of the people I talked to for this article, the desire to create a unique way of working that avoids politics is a major motivator in starting up something new. Dennis goes on to say,
“We wanted an environment free from unnecessary layers of management, tedious policies, and office politics. It had been difficult to find that elsewhere so we decided to just do it ourselves.”
What connections do you have that will help your business to succeed?
When you are starting your business, the first place you are likely to find your customers and your support network are from the people you’ve met along the way in your professional career. Every interaction you’ve had is suddenly a potential contact to help your business grow. When I started Proto-type Theater in the late 1990s, I raised my first few thousand dollars from friends and family. From there, I expanded to other contacts I made through work until we were eventually able to be financially sustainable through grants and touring revenue. There were many scrappy years when we first began, but whenever we needed help we almost always found it amongst our closest friends and family who chipped in to help set the company up for success.
Look at your network closely: Do you have a strong group of people who you can call on to help you turn your dream into reality? You may find them in surprising places, so don’t discount any network you belong to including alumni associations, social networks, and friends, and family. For Mark, his first client at FOUR32C was the company he left behind, Condé Nast. For Modern Craft, some of their early work came from former colleagues and clients from Blast Radius. Dennis at ATTCK has used his connections as the cornerstone of his business model. He says,
“Our business model is our secret weapon. We don’t hide from other agencies, we align with them. In fact many of them are our clients and partners and many people we work with are also close personal friends we’ve made through years of consulting.”
This aligns closely with Modern Craft’s experience. Randy notes that he has been surprised to find “that other agencies would genuinely be more interested (and less threatened) to partner.”
Sometimes support might come from highly unlikely places – even your competitors.
Can you survive financially if you earn less money for the first six months to a year?
Every business sector is different, but within the digital realm it is common for the first year to require the founders to reinvest at least some of their salary, resulting in reduced personal earnings in the first year. In year two, you can aim to be back to where you started in terms of salary, and by year three you may be able to earn more. I like to use the five-year rule, which is that you shouldn’t expect to make significant money until somewhere near the five-year mark. And that, of course, is if you are successful. In order to protect yourself, be sure to start your business with a small nest egg that you are willing to part with if necessary.
Of course, my advice to come with a nest egg is the conventional, safe approach to starting something new. But sometimes, the potential reward outweighs the risk. The folks at Modern Craft left their jobs at Blast Radius at the top of their game and, though there have been some ups and downs, they don’t seem to be looking back. Here is how co-founder Randy Siu described it nine months after starting Modern Craft:
“My partners and I all had busy roles at our agency, and at home we each have young kids. So trying to moonlight a new business just wasn’t an option. Maybe it was impatience. Maybe it was stupidity. But for me the simple act of planting a seed — the very idea of starting something new and exciting — put things in motion. I could have waited to see if my bonus would come through. I could have tried to do it a bit later, after the kids got a little older. I could have waited until my wife went back to work. But I didn’t. It just felt like the right time to take the blue pill.”
A year and a half in and Randy remains bullish. He adds,
“We bootstrapped our company and (gasp), paid ourselves and everyone we employed or utilized services of along the way. So in that way we have forced ourselves to validate our offering quickly. Fortunately, we’re doing something right because we’re not only around but we’re growing and winning work we WANT to be doing.”
If you are starting with a partner, have you stress-tested your working relationship?
Starting a business with someone is the same as getting into any deeply personal relationship, so chemistry is key. When you consider who you want to partner with, be sure to choose wisely. You want someone who you can be honest with, and who will be honest with you. They should share your values and bring something to the partnership that you don’t already have. How do you test whether you’ll be a good partner? One way is to start by coming up with a list of core values together and seeing if yours align. If they don’t align, don’t be afraid to walk away. Better to do it before its too late. For Randy, having a solid partnership has been the cornerstone of Modern Craft’s success.
“We hadn’t planned on starting an agency, but the idea of doing something together excited us far beyond any other options. Individually, we would be all right wherever we landed. But together, we could collaborate and utilize our collective strengths. We could lean on each other. We could spread the risk and share in a (hopefully) greater success.”
Do you have a long-term vision?
Getting started can be difficult and it is important to get it right, but too often companies only focus on the immediate opportunity or challenge. This may have been what ultimately ended Hyperspace Cowgirls as we didn’t have the capital to sustain a highly volatile business climate and we didn’t have enough income coming in from non-project based sources. We did have a business plan but, in hindsight, it was missing many of the core components of a strong plan. We were also probably overambitious, growing too fast without enough revenue to cover aggressive growth, which is a dangerous trap to fall into. Knowing what size you ultimately what to get to and focusing on your core values can help you to shape your long term vision and ensure that you aren’t lured into taking on work that degrades your unique selling point. When asked what the future of FOUR32C looks like, Mark has a smart response:
“Doing what we’re doing now. Not a lot more people. But able to maintain a very high quality of work for great clients. Maybe another studio in Stockholm, Ljubljana or Ho Chi Minh City would be nice. More time going gallery hopping or hanging out on the High Line.”
The allure of starting your own business is that it gives you total freedom and the ability to create a product or service that you really care about. In the current climate, especially, when it seems a new set of millionaires are made every day and where there are incubators, and venture capitalists, and accelerators in almost every city, the call to make the leap can be strong. But while it may be tempting, be sure you are ready to work hard for something you believe in and that you have something truly unique to offer. For a great personal reflection on what one year into a new agency looks and feels like, check out this post from the guys over at Modern Craft.