Entrepreneur and the Startup

Time for Ecommerce Entrepreneurs

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Most people know that launching a business, especially online, has never been easier. However, few realize how true this is in the ecommerce space. Today there are fantastic resources available that allow for the relatively seamless development and maintenance of e-stores. In my experience, working only nights and weekends, I was able to launch an online shop for Brazilian apparel and accessories in just a couple of months. So if you ever thought about starting your own business, I suggest you read on.

Setting up an ecommerce doesn’t require any technical skills whatsoever. I never coded or designed a website. Still, I was able to set up my Brazilian lifestyle store completely on my own. Platforms such as Shopify provide you with the complete toolbox needed for your ecommerce, including awesomely designed templates. In the backend, they operate as intuitively as ticking boxes and drag-and-dropping images. They also integrate with several useful apps, which help you with marketing, CRM, logistics and all other aspects of running a business.

In terms of supply chain in particular – assuming you will be selling physical products – our lives have also been made easier by fulfillment companies, like Printful. Through them, you can automate the supply management of the business, from production to distribution. Not only that, but depending on what you sell, you can set up your business with no overhead or inventory costs, and have your products be manufactured and shipped on demand, one by one.

The beauty is that what’s left is what the majority of entrepreneurs would consider the most pleasant side of any business: value proposition, strategic positioning, product design, marketing, and customer relationship. In my case, for the most part, I developed the business concept and work on the strategy and marketing. My partner, who is a fantastic artist, takes care of our Brazilian themed art and designs. Other parts of the business were outsourced to freelancers you can find in websites such as Fiverr or Upwork.

So if you have the faintest idea of a product sell, this is the time to pursue your startup dream. There are plenty of free resources out there to help you refine your idea, test assumptions, and assist you in arriving at a winning business proposition. For example, pick a few ecommerce podcasts to listen to, such as Shopify Masters and Ecommerce Fuel. Read relevant blogs such as Digital Marketer, Get Elastic and Practical Ecommerce. This article on customer value optimization (CVO) is a great place to start thinking about your business.

Of course, building and running an ecommerce is still tons of work. But work you can administer at your own pace, especially if you are good at delegating. So go out there, think of a great business idea, develop it, and let’s get to work!

Image: creative common.

The Business of Self-Publishing: 5 lessons from an indie author

self publishing, independent publishing

Recently, I finally got to fulfill a personal dream and launch my own book, The Drifting Self: a novella. Being an entrepreneur, I decided to take matters into my own hands: I published the book independently and have been marketing it by myself.

In the process, I’ve faced a steep learning curve. I read dozens of articles about self-publishing and indie book marketing, watched countless YouTube videos on the topic, connected with hundreds of fellow independent authors on social media, and learned from my own trials and errors. Here are five lessons I learned, in no particular order:

  1. You don’t have to be a (good) writer to be a non-fiction bestselling author: WHAT? Yes… A lot of authors are really simply curators, doing research on a particular topic and putting together, for example, series of “how to” books. Others outsource writing altogether to ghostwriters in order only to focus on the marketing side. I know, it’s pretty crazy, but self-publishing is a business and many entrepreneurs are jumping on the opportunity very pragmatically. Mind you, this does NOT mean that the quality of such bestselling books is poor. If you don’t have good products, people won’t buy them. It is just that the way non-fiction books are written has changed a huge deal. In the past, a good book about eating healthy, for example, was probably written by a PhD in Nutrition; today, with all the vast information available to everyone, a good curator can put together a very good book on the topic, mostly by quoting articles from respected journals, blogs, and general media. You get the picture.
  2. If you already have a following of any sort, self-publishing is the way: Say you are a blogger and have thousands of followers; a musician with an extensive mailing list; or a successful businessperson with a somewhat recognizable name. If you want to publish a book, you have much to gain from self-publishing versus going with a traditional brick-and-mortar publisher. Amazon’s Kindle Direct Publishing (KDP), its self-publishing platform for ebooks/Kindle, offers in most cases a 70% royalty on the book’s sales price. A traditional publisher will usually offer you 10% at the most. It is true that they would do most of the marketing and other legwork for you, but with such royalty difference, if you already have loyal followers to get started (which is the most difficult part of marketing a book) it is probably worth trying it on your own.
  3. Don’t worry about the technical details, focus on having great content: Writing a great book is the most important job for you, be it fiction or non-fiction. Once you have your content, using CreateSpace, KDP or any other platform is a piece of cake. There are several instructional videos on YouTube showing you how to use these publishing tools; they are very intuitive. Also, indie authors help each other, you can join several Facebook groups, cold-call other authors, be an active member of this vibrant community. I assure you that, once your content is finished, in a couple of days maximum you will be able to upload it to any platform.
  4. All the help you need is much cheaper than you think: You might be asking, “but how the heck will I have a nice cover, have my book professionally proofread, edited, do the basic marketing etc.?” All these services are super cheap nowadays. If you go to sites such as Fiverr and CrowdSpring, you can find amazing designers working out of India, Romania or the Philippines, who will do a great ebook cover for you for anywhere between $5 and $50. You can also get proofreaders, editors, beta readers etc, who will do a great job for two digits, maybe three. And don’t forget to use friends and family too, they can provide useful feedback, help you bounce ideas off etc. In terms of marketing, there are tons of tricks to learn from fellow indie authors, as well as resources to use, such as sites that promote your books for free, bloggers that review indie books, Twitter accounts that retweet your book to thousands of followers etc. It’s not easy and it takes time. But it’s certainly doable if you have the drive.
  5. Look at Amazon not as a bookstore or retail store,  but as a search engine: Amazon is the second largest search engine in world, only behind Google. The easiest way people will find your book on Amazon is through its search tool. When you go to Amazon and want to buy a book, say, under the genre of “magical realism”, that’s what you type in the search box, right? Once you look at Amazon this way, you start understanding its algorithm, and you’ll be able to make your book accessible to those who might want it most. You will be able to classify your title under the most efficient categories, choose the best keywords to associate with it, and use a couple of other tricks to rank well. I’ve been following a few best-practices I’ve learned in my research, and my book has been ranking anywhere between 5,000 and 40,000, depending on the day, out of the millions of books listed on the Kindle store – not bad for an indie author.

So, if you’ve been promising yourself that you will write a book in your lifetime, the time is now. No more excuses. All the tools you need are available to you. Write on!

Andre A. is an entrepreneur, economist and author.

Have you ever published a book? At least meant to? Tell us about your experience!!

Illustration: arwisebooks.com

A country is hit by the entrepreneurial bug and start-up culture

jamaica startup women

Guest post by Susana Garcia-Robles (@RoblesSusanaro)

September 9th:  Arriving at my destination to speak at a Venture Capital conference sponsored by a local government agency.

September 10th and 12th: Attending the inauguration of the country’s Start-Up program and meeting the women behind that initiative and Startup Weekend. Listening to the manager of a prestigious private sector incubator. 

September 11th and 12th: Meeting tech entrepreneurs and participating in pitch events showcasing the winners of two local pitch competitions— one run by a local university, the other  a National Business Model competition spearheaded by a US fund manager who visited this country last year, fell in love with it, and has supported different entrepreneurial activities since.

September 12th: Meeting with a woman who runs mentorship programs for entrepreneurs. Meeting with potential  investors in VC/PE funds. Meeting with regulators.

Can you guess where in the world I am? If you are thinking Silicon Valley, Israel, or Brazil, you’re wrong. 

I’m in Kingston, Jamaica.  And I’m witnessing history in the making.

When I started working with the public and private sectors in developing entrepreneurial ecosystems in Latin America and the Caribbean more than 16 years ago, the world –in spite of the Internet boom – was a very different world than the one we live in today. We were beginning to experience the power of the Internet. Globalization was an issue discussed at an academic level. In Europe, the Euro had not been implemented yet. The region was not an investors’ destination, and there were subjects pending to be taken care of before we could be considered as a region with potential: poverty, economic crises, corruption, weak institutions, and lack of innovation better described us then.

Fast forward to 2014. The region has improved dramatically: many people who belonged to the Base of the Pyramid are now entering the middle class. No global or regional crisis has originated in the region  in a long time and better yet, we showed resilience during the last global crisis. Democracy is established at large. Globalization, coupled with access to technology, has shortened geographic distances, making access to information and knowledge available all over the world. 

Add to this mix the benefits of many countries having a young growing population known as the Millennials. They were born and live in a world where technology allows them to reach out to anyone they want, learn and work in informal settings, and be informed of what’s going on in the world as events unfold. Most importantly, they have developed a sense of belonging to a global community where they can work together in teams.

And this is what’s happening today in Jamaica. The  entrepreneurial bug has infected this country  and there is no cure for this.

I have met these Jamaican entrepreneurs and they resemble any other entrepreneur from any country that has a well-established VC industry. They are full of drive, trying out their ideas to make them into viable business models that can attract financing.  Angel investors, incubators, accelerators, MVP, pivoting the model, are part of their daily lexicon.

Together with many actors that come from different sectors of the country, the MIF is helping this ecosystem thrive: establishing a culture where risk of failure is accepted as part of the innovation and start-up creation process (fail fast, learn from your mistake, get up and move on to try again!), where being an entrepreneur does not mean having lost your job and not yet found your next one, but a life choice.

So…  yes, there is a Start-Up Jamaica, a Startup Weekend Jamaica, a Branson Centre of Entrepreneurship, a Jamaica LAB. And entrepreneurs are running start-up companies like Herboo, DocuJam, and Regal Farms Ltd.

Best of all, the Jamaican entrepreneurial movement and early-stage industry seem to have a greater participation of women than in other countries like the US or Brazil. Women are running the Start-Up programs and incubators, and start-up teams have women founders!

The future is bright for this island committed to fostering innovation from both government agencies and the private sector. At the MIF, we are working on a project with the Development Bank of Jamaica to strengthen this growing ecosystem for venture capital.

Meanwhile, major players in the Jamaican economy are getting involved as well. Jamaica’s largest bank, National Commercial Bank (NCB), and the Jamaica National Building Society (JN) are the companies behind Start-Up Jamaica, the cellular company LIME helped establish the infrastructure for Start-Up Jamaica’s awesome space. 

Have you seen signs of the entrepreneurial bug in Jamaica? And where do you think it will be seen next? 

How international development organizations can help scale BOP businesses

dfi bop business

Most discussions regarding the scaling of base of the pyramid (BOP) models focus on financing the BOP companies themselves. While this is obviously very important and the way to go in the majority of cases, there are other ways development finance institutions (DFIs) could help BOP ventures scale.

My first company, PV Inova, was a BOP business in Brazil. It developed and patented a public GSM telephone that allowed low-income commuters to place cheap calls while on public transportation vehicles. We raised significant amounts of funding (equity, debt and grants) from different sources and closed partnerships with players such as Brasil Telecom, Oi Telecom, the Municipality of Porto Alegre, and Metro Rio. The venture received public support and media attention, and earned awards for social innovation and product development. However, ultimately the business did not thrive due to lack of large-scale financing. We then pivoted the company into a different business line, away from BOP.

What did I learn from this experience?

When you are in a capital intensive business (PV Inova for example demanded expensive hardware production), the conventional financing options do not necessarily work. Why? Because the BOP startup does not have the balance sheet to take on large amounts of financing, be it debt or equity. This is where there is a role for development finance institutions (DFIs).  DFIs could finance the large companies that are willing to purchase from or partner with BOP startups.

To illustrate this, I‘ll refer again to my own experience. After launching a pilot on 400 buses in partnership with Brasil Telecom in the city of Porto Alegre, PV Inova came back to the table with the telecom’s directors to negotiate the expansion of the business. Nevertheless, because margins were (by definition, as with most BOP businesses) thin and the project relatively small in the eyes of a large company, they ultimately decided not to continue to invest. They did however leave a door open in case we could come up with “interesting ways” to finance the scaling of the venture – which we couldn’t do at the time.

However, what would have happened if I had brought to the table a DFI willing to provide funding for Brasil Telecom to purchase the first large order of phones from us? This could have been the ultimate nudge, or tipping point, to make the transaction viable, representing the best of both worlds for all parties: (1) PV Inova would have been able to scale the business; (2) Brasil Telecom to finance the growth of a low-income targeted business and explore new market and branding opportunities; and (3) the DFI would have leveraged the expansion of an innovative BOP business while taking the lower risk of a large company’s balance sheet.

My experience negotiating with large companies from the “weak side” tells me that the involvement of a DFI could add real value to closing the deal. Also, risks for all parties could be manageable because, at the end of the day, the DFI should be paid back regardless of the success of the venture. Innovative and sustainable business models require innovative and sustainable financing solutions.

Andre Averbug is an entrepreneur and economist.

See also Copycat Businesses Can be Great. Photo: Reuters for The Telegraph

The Benjamin Button Startup

baby startup

Guest post by Suhail Kassim

A new startup is like a baby

A startup needs to be cradled and nourished. Even so, there is no certainty that the baby will grow up to be a lean mean fighting machine. In this post, I begin to investigate the phenomenon of some exciting startups which then refuse to grow up — the “Benjamin Button” startups.

Introducing the Benjamin Button startup

A very small minority of entrepreneurs seem to be amazing at finding the right sort of help in their early days. They join rock-solid incubators, find top-notch mentors, maneuver their way into active university forums, win famed business plan contests, know where the hungry angel investors sit. These entrepreneurs are obviously off to an awesome start. Destined for greatness, right?

Not necessarily. Many (if not most) of these startups struggle to fulfil their potential. They stubbornly refuse to scale-up, linger on until they lose relevance, then meet a slow yet inevitable demise. The internet is littered with outdated websites of nascent ventures that never monetized. The chrysalis never transforms into a butterfly. 

I call such ventures “Benjamin Button Startups”, named after Benjamin Button children who refuse to show signs of growing up.

Startups fail all the time, what’s the big deal?

In my personal experience, there is a growing trend of highly promising startups running into the ground. This trend is disturbing for at least two reasons. 

Firstly, this sends a hugely discouraging signal to all other startups: if these poster children fail, despite everything going in their favor, what hope is there for the rest of us?

Secondly, outside startup hotbeds like the Valley, the early stage ecosystem is typically not vibrant. It often has limited resources that can only support a few chosen entrepreneurs at a time. Hence their imperative to succeed — and thereby to return more to the ecosystem than they took out of it — is higher. When they do not, it causes a small ripple. Just a few such ripples could shake up the already fragile ecosystem. The already wary seed investor will turn away, LP funding will ruthlessly re-route to greener pastures, incubators will be left with tarnished reputations, the Fortune 500 executive will politely decline to mentor the university business plan winner. 

What makes a startup a Benjamin Button?

Sometimes it seems to me such startups are victims of their own early success. The founder confuses the “first big win” with the ultimate destination. He/she gets caught up in all the attention, the award ceremonies, the media buzz, the blogosphere hype. Some entrepreneurs succumb to the heady temptation to become celebrities today instead of business moguls tomorrow. They end up doing a ton of calorie-burning activities like giving guest lectures, mentoring other startups, speaking at jazzy forums. As a result, they stay stuck in the “successful-student-startup” mode instead of growing up. And if the founder does not grow up, the startup won’t either.

There is also an element of hubris. Entrepreneurs sometimes think the same skills needed for early wins will carry them through scale-up. This is almost invariably not the case. Early stage success can happen through blue sky thinking, strong personal and professional networks, hyperactive multitasking, good mentors, and a couple of passionate co-founders. There is adrenaline rush after adrenaline rush. Scaling up, on the other hand, needs grit, patience and the ability to fight boredom. It needs long nights out working on a particularly stubborn piece of code while dining on ramen noodles. It needs the founder to hyper-delegate and decentralize or risk falling into the “Founder’s Trap”. It needs a different kind of mentor and adviser — not someone who can ideate but someone who has actually implemented. 

Also, for VC-stage companies, the VC is always more demanding — and less polite — than the angel investor. Unlike a basement startup with three high school friends who are bootstrapping off their pocket money savings, here the money runs out quicker: the VC-stage venture needs to pay its “employees” (it’s no longer just the co-founders) market-pegged salaries (and, gosh, benefits!) — and I’m not even including joining bonuses and annual bonuses and small stock options to the first 100 employees… . In some ways, starting a venture is akin to a part-time Masters program, while scaling up is like a full-time PhD program. Not every MBA gold medalist is suited to do a doctorate in business administration.

Finally, there is the culture of failure. Some ecosystems reward failure — the Valley places a premium on “fail fast, fail early, fail often” — which reduces the tolerance level needed to slowly but surely cultivate a fledgling startup, leading to premature demise of ventures that should have succeeded. Other cultures punish failure — and in such places, the founder is tempted to grab whatever minor victories he/she can — whether it be to speak at a forum or give a newspaper interview — at the cost of focusing on the core business itself.

See also Time To Start a Business – or Not. Illustration: covenant-harvest.org

Have you witnessed instances of Benjamin Button startups? If yes, do you agree with the reasoning above? What are the other explanations as to why this happens? Leave us a comment and let us know your thoughts!

5 Bad Excuses Not To Start a Business

entrepreneur startups

Lame reasons to give up before you even start

I often hear people claim to have good ideas for a business, but say they can’t pursue them for one reason or another. Some of course are valid, but others are misconceptions that deserve to be revisited. Here are the top five from my experience.

1. I don’t have the business skills

Not having business experience is not necessarily a problem. There are several ways for a person with a good idea for a product or service to develop it into a business, regardless of his/her background. First, you can look for a business savvy co-founder, someone you trust and that can take the lead on the business side while you focus on developing your product. Second, you can look for structured initiatives that support startups through mentorship and guidance, such as business incubators and institutional programs, like I-Corps and others. Third, you may join an accelerator, like Y-Combinator, TechStars and dozens of others, where mentorship and funding come hand-in-hand. (However, as I point out in another post, you do have to bring something to the table other than just an idea.)

2. I don’t have the technical skills

This is the other extreme to the excuse above: not having the technical skills to develop your product or concept. This is even less of a problem because, if you have the business skills and can articulate the commercial value of your idea, finding engineers or coders to build a prototype or MVP should not be so hard. You might engage them by offering equity (even bringing someone in as co-founder and potential future CTO), royalty payments, or raising a little seed capital to pay consulting fees. You can also explore partnerships with universities and other research centers. If you got something big and present yourself properly, finding the right resources to build your product should not be a deterrent. (Note: In my companies we have built software and websites without previously knowing much about coding – we simply mobilized the right resources).

3. I don’t have the time

Well, you don’t have to immediately quit your job or drop out of school to launch your startup. Most entrepreneurs begin to develop their ideas working a few hours at night and on weekends. If you are really passionate about your idea, you can certainly put on 30+ hours a week even if you are working full-time or going to school. You can also involve people who would put a few hours of their own. After 6-12 months in this “part-time” fashion, you should be able to at least reach a point where you can make an educated decision about betting the next couple of years full-time on it.

4. I don’t have the money

Raising funds for early stage is certainly not easy. But nowadays, building a prototype or MVP is much cheaper than it used to be, so funding needs are much lower on average than say 10+ years ago. There are several free or cheap tools for building products (open source software, Wix.com and others for websites, 3D printers for hardware, CrowdSpring and the like for design etc.) and marketing them (Salesforce, Facebook pages, blogs etc). Similarly, funding has become a bit easier with tools like Angel.co, that match angel investors with entrepreneurs, crowdfunding websites like Kickstarter, and the angel clubs and networks that sprout all over the place. Also, don’t be shy to approach family and friends for seed capital or loans, they will likely appreciate your efforts (as long as you are transparent about the risks). Finally, you may be able to get a lot done without any funding at all, just by bootstrapping and involving the right partners, who would work for equity or success-based returns.

5. I don’t have connections (nobody knows me)

Today it is easier than ever to make your voice heard and connect with people. Even if you don’t know anyone in the industry and don’t have a track record to show for, if you build something that people care about, you will be able to reach the right persons. Check your LinkedIn connections (if you don’t have a LinkedIn account, get one yesterday!) and see if anyone in your network (2nd and 3rd levels included) knows a person you need to reach: ask for an intro. Sign up for all relevant Facebook/LinkedIn groups and take part in discussions. Participate in industry events, meet people, shake hands, network. Cold-call if you have to, just make sure you do it with taste. Start blogging/tweeting about your product or industry. In other words, if you don’t have connections, just make them.

If you believe you have a winning business proposition, as well as the drive and guts to pursue it, none of the issues above should deter you from going for it!

See also Time To Start A Business – Or Not. Picture: ThinkingForward (Tumblr).

Are you sitting on a good business idea? Leave us a comment!

7 Reasons to Join a Business Incubator

business incubator, startup incubator

Business incubators are great for startups

The definition of business incubator (or startup incubator), according to Entrepreneur’s Encyclopedia, is an “organization designed to accelerate the growth and success of entrepreneurial companies, through an array of business support resources and services that could include physical space, capital, coaching, common services, and networking connections”. They are often sponsored by private companies or municipal entities and public institutions, such as colleges and universities.

I spent over three years in two different incubators – Brazil’s Genesis Institute, part of PUC-Rio’s university, and US’s Rockville Innovation Center, run by Montgomery County’s Economic Development Department – and can personally attest to their benefits. They played an important role in leveraging my businesses and providing valuable support in the early stages of my startups. In fact, according to the US Small Business Administration, 87% of incubator graduates stay in business, in contrast to 44% for all firms. To be fair, it is hard to know how much is due to good selection of companies versus good resources and counseling – but you still want to be among the 87%, don’t you?

7 reasons to join business incubators (no particular order)

  1. Seal of approval. When you’re nobody, it’s good to be associated with somebody! As an incubated company in a prestigious institution, when you go out to look for partners, clients, or capital, you can at least show some credentials. People will know that you have gone through a selection process and were capable enough to enter the incubator. While hopefully understanding you’re still a startup, they will have more confidence in your ability to commit and deliver than if you were unknown and unaffiliated.
  2. Administrative support. May not seem as much, but when you’re only a couple of people (or worse, a lone wolf) it is very important to have accessible support to mundane – and not so mundane – tasks, so you have more time to focus on the important stuff. You want to spend as much time as possible developing your business. Admin help usually comes in the form of a common assistant, interns (especially if the incubator is related to a university), affordable bookkeeping, CPA and legal services, as well as access to basic office gadgets and supplies.
  3. Facilities. Good incubators offer you a nice-enough office, with common meeting rooms and a professional atmosphere – certainly much more than your bedroom or garage! This comes in handy when you need to meet with clients and partners, or interview candidates. It is also good for the entrepreneur’s moral. I was able to get much more work done after walking into a decent office, in a nice building, surrounded by other entrepreneurs, than working from home. Also, incubators usually offer flexible and affordable rent and utilities, which you won’t find elsewhere on your own.
  4. Cross fertilization. Being close to other entrepreneurs is great. You are able to interact with like-minded people, most of whom are going through some of the same issues you are facing. You share tips and experiences. Startups in incubators tend to help each other out, and often engage in partnerships and become each other’s clients. I did business with two fellow incubated companies. At the very least, at the end of the day, you feel you’re not alone. Also, if your incubator is affiliated with a university or company, you may develop fruitful R&D partnerships and have access to great talent.
  5. Mentorship and professional services. Incubators are catalysts for mentors and consultants. I was often approached by people wanting to help: some for free, some for equity, others for fees.  Not all help is the same, of course, and in most cases I passed; but one can find specialized help more easily than if working alone. Incubator managers usually have a Rolodex with contacts of  designers, marketing specialists, biz dev folks, engineers, coders etc, who worked for previous incubated companies and are just one phone call away.
  6. Access to capital. All types of early stage investors – angels, seed funds, venture capital – have their radars on incubators, especially the ones with a successful record of spinning good companies. Incubated businesses are often approached by investors, either one-on-one or at pitching or entrepreneurship events. Also, incubators usually do a good job of opening your eyes to funding opportunities you never knew existed, including government and small business grants and subsidized loans. My first company earned a large government grant from the Brazilian government thanks to the hint we got from Genesis and their help in filling out the forms.
  7. Connectivity. Besides connecting with fellow incubated companies and adjacent resources, there are several national, regional and even global incubator networks and programs, such as Brazil’s Anprotec and World Bank’s global infoDev. This means that if you need to internationalize your business, find strategic partners in different countries, or benchmark experiences, being in an incubator can also be useful.

Of course, don’t expect miracles. The success of your business ultimately depends on your company developing products and services people care about, and your ability to adapt and innovate. Also, if you join an incubator, don’t necessarily take all advice you get at face value; people are just people, some are more insightful than others, and not all incubators attract the best talent. But if you’re starting out, that’s definitely a good place to consider.

See also Not All Angel Investors Are from Heaven. Illustration: shutterstock.com

Do you have experience in a business (startup) incubator? Leave us a comment!

Copycat Businesses Can Be Great

innovation copycat business

Innovation is relative, originality overrated

Innovation is one of the sexiest words in the business vocabulary. However, originality can be overrated, especially when it comes to the opportunity of bringing a proven business concept to a new market. The world is full of examples of copycat business models that were successfully replicated in new countries.

The Chinese watched the successes of Amazon and eBay and launched Alibaba, which today has higher revenues than both U.S. firms combined. Indians followed suit with e-commerce Flipkart. Brazil’s Peixe Urbano, in turn, mirrored itself on e-coupon websites like Groupon and LivingSocial. Pretty much every country or region in the world has its own travel booking website, inspired by Expedia and Travelocity. And on and on we go.

The main benefits of copycat business models

The first benefit of being a copycat is the fact that the business model you are implementing has already been proven elsewhere. Of course, this doesn’t mean it will be a hit in your country, but at the very least you can incorporate several lessons before developing the product and launching the business. The risk therefore is considerably lower than that of an outright innovation, with no benchmarks to fall on. In fact, lessons learned can be applied not only at entry, but also from the moves and mistakes your reference company makes along the way, for it will always be a few years ahead of you. You benefit from the best of both worlds: innovation (at least in your target market) and proof of concept/benchmarking.

Second, pitching the business to investors and potential partners is easier than with other startups. What’s not to understand when you tell someone you want to start “Colombia’s SalesForce” or  “Turkey’s Paypal”? Investors quickly relate to your idea and can tell you if they like it or not. This may seem trivial, but it comes in handy when you are dealing with people who are used to listening to dozens of business ideas every week.

Third, copycats have the privilege to be born with a potential exit strategy already in place. If you are Turkey’s equivalent of Paypal, and market conditions are favorable, you can always approach PayPal for an acquisition or at least a partnership. Of course there’s no guarantee of that happening, and they may decide to compete instead, but the path is clearer than for many startups. In fact, copycats are often approached by their inspirers wanting to expand into new markets through strategic acquisitions.

Challenges with copycat companies

Nevertheless, there are a few particular challenges associated with copycats. Barriers to entry for replicated business models are by definition low and you usually have no IP edge. The innovation doesn’t belong to you and, unless there is some sort of local IP protection (rare), anyone with the same idea and resources can jump in. As an example, after the first couple of crowdfunding websites emerged in Brazil, dozens followed suit, ironically “crowding” the market. The only things that keep you on top are first-mover advantage, fast market-share growth, good marketing and continuing innovation.

Also, adapting the business model to a new market can be tricky. Country and cultural differences have to be taken into consideration. For instance, in certain regions of the world, you can’t really launch a peer-to-peer lending website because charging interest from peers is not considered a socially acceptable practice. Also, trusting strangers in web2.0-type interactions may not be something that the local meme supports (yet).

Macro role of copycatting

At the macro level, copycatting plays an important role in technology transfer, from developed markets to developing ones. New solutions and businesses are internationalized at fast pace and relatively low risk, benefiting the economy by fostering local innovation, creating complementary businesses and generating jobs. It is also one of the best ways for budding entrepreneurs in less mature markets to learn from more experienced ones. A copycat venture is a great first gig for an entrepreneur. And, who knows, we may get to a point where increasingly we shall see Silicon Valley startups copying innovations from Brazil, India and other developing markets.

See also An idea Is Just That. Image: Brad Jonas for Pando.

What’s your favorite copycat business? Leave us a comment!

Greatest Entrepreneurs Adapt to Survive

greatest entrepreneurs successful entrepreneurs

Successful entrepreneurs welcome change

There are tons of studies about the key traits that make up a successful entrepreneur. Some of the characteristics attributed to the greatest entrepreneurs are: vision, talent, perseverance, ability to innovate, leadership. However, from my observation, their single most important common characteristic is the ability to adapt. In a clear Darwinian fashion, those who adapt the best, thrive. No entrepreneur has succeeded without going through at least one of three forms of adaptation: adjustment, pivoting and rebirth.

Successful entrepreneurs adjust, pivot and resurrect

The first form of adaptation, and one that most companies go through in one way or another, is business model adjustment. Companies need to constantly evolve and adjust, quickly reacting to customer feedback, market changes, competitors’ moves. Facebook started as a simple “hot or not” website and evolved to the giant social media platform it is today, by exploring new forms of social interactions and testing monetization schemes. Apple tinkered with several consumer electronics before focusing on computers and then expanding to music and other business lines. Google stumbled for many years as an unprofitable search engine, before it figured out how to make money and expand to other (profitable) areas.

The second form is business pivoting, which implies a more radical change in direction. I’ll use the example of one of my companies, Brazil’s PV Inova. We started the business as a BoP (base of the pyramid) model, developing telecommunication technologies for public transportation vehicles, targeting the low-income population. However, because margins were too thin, after a few years, we decided to capitalize on the knowledge acquired dealing with fleets and changed the business completely. We developed a fleet management software to be offered on the cloud to companies that manage large fleets. The company was pivoted, from a hardware telecom business to a scalable SaaS logistics venture. Also, to use a more well-known example, Paypal started as a cryptography company and only later reinvented itself to become an online payment pioneer.  

Finally, the last and most traumatic form of adaptation is rebirth after failure. Most successful entrepreneurs have folded at least one business (sometimes several) before they hit the jackpot. Being able to rise from the ashes is the ultimate adaptation challenge and requires passion, conviction, and courage. Most iconic tycoons have dealt with failure before launching a successful venture. Henry Ford had two unsuccessful car companies before getting it right. Bill Gates failed with Traf-O-Data before launching Microsoft. Even Richard Branson, with all the amazing businesses he launched, went through more failures than successes, including Virgin Cola and Virgin Records, which were never sustainably profitable.

When it comes to launching a startup, there is only one certainty: it will not become a great company if you stick to a rigid plan that was set out in the beginning. If you are doing something minimally innovative, you will have to go through many transformations. The entrepreneur is the chameleon of the business world. 

See also An Idea is Just That. Image: scribblitt.com.

Are you an entrepreneur and pivoted a business or failed? Leave us a comment!

Not All Angel Investors Are From Heaven

angel investor

On Angel Investors

As entrepreneurs, in the initial stages of the startup, we often think that the answers to our problems will come in the form of an angel investor. By definition, angels are high-net-worth individuals who get involved early in the company’s life, bringing capital, sector knowledge and network, and relevant expertise.

Angel investors usually invest anywhere between $20k-$300k and take on 10-30% ownership. They spend some of their time coaching entrepreneurs, opening doors, helping the company build the team and product, participating in strategic decisions.

Not all angel investors are the same

However, not all angel investors are the same. Reality has “expanded” the definition of an angel and many times what we see is well-off folks with no particular value-add (beyond the dough) playing the angel role almost as hobby. This is particularly true in less developed markets, such as Brazil (which I know from experience) and the rest of LatAm. Being rich and successful doesn’t necessarily make someone a good angel.

As an example, a retired C-level executive from a large pharmaceutical company may easily have a couple of hundred thousand dollars to spare and decide to invest in a startup. Why not help a couple of smart kids with a brilliant idea for a new technology or web business? What better way to stay busy and motivated!

The problem is that often these investors often have no idea what they are getting into. They just don’t know the real challenges and risks of starting a company. As time goes by, the product doesn’t launch as planned, the bank account gets thinner, and the investor gets nervous.

Entrepreneurs also get frustrated because they had expected miracles from this angel. After all, he is the older, successful mentor, who’s been there, done it all.

But it turns out the guy you looked up to actually doesn’t know much more than you when it comes to building a tech company from the ground. His rolodex only has contacts of retired people from irrelevant sectors. And as he sees his investment going down the drain, he doesn’t think you’re that cute and inspiring anymore.

Of course, I’m painting a pretty extreme scenario here. But the point is that you shouldn’t necessarily accept the first person who’s willing to invest in you. If the angel investor is not a good fit, it’s better to hold your horses, bootstrap the business a bit further, until you find someone who can actually add value to the company.

Originally posted on the Entrepreneur Academy (NEN). Image: nenonline.tv. See also Time To Start a Company – or Not.

What’s your experience with angel investors? Leave us a comment!