The Rapid Startup Design Strategy Overall : Go stepwise, don't dawdle, constantly always ask yourself, " Is this a dead end? &qu...
Saturday, October 21, 2017
To Succeed You Need to Risk Everything and be Stubborn - NOT! (ENT 630-1)
The author presents a story in which he intends to demonstrate to venture capitalists the idea of a restaurant with a jungle theme. His tactic is to convert his house into a jungle. He proposes this as an example of why the entrepreneur must have sufficient passion and take necessary risks to succeed.
His strategy is a classic "throw in all the chips" type of gambling based risk-taking. One puts all one's effort into one potential solution and risks everything. Further, it demonstrates little planning regarding the overall business with the only emphasis focused on highlighting the desire to create something new based pm an inspiration. Overall, it is not surprising that the potential funder was dubious despite the fact that his family and friends thought the house was impressive. A house lit up for the holidays is similarly impressive, yet no sound investor would see such a home as evidence of a potential investment in a holiday-themed enterprise (or hasn't yet).
In the process, the author mortgaged his house and spent $400,000 on alterations to switch it into a jungle.He spent several years trying to convince others that a restaurant was a good idea using his house as a demonstration. It appears that only one fish caught this bait and it took 2 years to real it in.
In the process, he did not pay his gas bill and engaged in illegal activities associated with stealing access to the resources of the gas company to keep his house warm (and his jungle viable). It's unclear how many other code violations he could be accused of in the alterations of his home. But it's likely that his use of electricity violated the electrical code. He angered others around him by turning a residential neighborhood into a demonstration of a concept. With the jungle alterations probably placed other houses near him at risk of fire and likely decreased their value. Most communities would have shut him down, causing him to lose the entire investment.
The money he used to alter his home was most certainly wasted and would not add value in the long-term. Also, all the alterations would need to be reversed yielding additional expense.
Further, many advisors do not recommend mortgaging one's house to obtain capital to engage in an entrepreneurial pursuit. There are several good reasons. In addition to the reality that if one loses, then one has lost a place to live, there is the more logical question if this is a good strategy. In fact, the additional stress of knowing that failure means losing a roof over one's head may cause someone to take less risk because the repercussions are so grave. In his case, such reckless behavior was not an issue as he apparently was going to accept any risk to achieve the goal obtaining the venture capitalist interest and achieve his passion. However, such reckless abandon is not typical behavior even for entrepreneurs.
The author presents his approach as the only solution in which he could have launched his entrepreneurial pursuit. He does not describe getting input from any other person before embarking on this extreme strategy. Had he asked for input (say a potential customer) a more efficient way to spend to $400,000 would be to set up a coffee shop with a jungle theme. Although the coffee shop might not have been quite as extensive as he proposed, it may have been sufficient to demonstrate the value of his concept. The coffee shop could have provided a potential revenue-generating example of his jungle themed restaurant. Customers could guide steady growth by asking about interest in decor changes, menu additions, meal preferences, and pricing. If successful, he might not have needed to seek venture capital funding to grow the coffee shop to a more extensive restaurant. Bootstrapping this process may have been a far more efficient and effective way of achieving his results without engaging in illegal and reckless behavior.
To summarize, Chapter 2 violates any good advice one might give an entrepreneur. Actually, perhaps it provides excellent advice - do the opposite!
Schussler Steven, Karlins Marvin. It’s a Jungle in There: Inspiring Lessons, Hard-Won Insights, and Other Acts of Entrepreneurial Daring. Vol Reprint edition. New York: Sterling. February 7, 2012.
Photo Credit: Bengal tiger in jungle-1920x1080.jpg. Author Hineshvalayil. 7 June 2016. This file is licensed under the Creative Commons Attribution-Share Alike 4.0 International license.
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