Take only the money you need
Regarding finance, Vardi put to the audience the following choice: should you take all the money you can get, or should you take all the money you need?
Stirs in the audience suggested that many believed in the ‘as much as you could get’ approach to starting a business, which, according to research, would be the wrong move.
Over-financing increases the burn rate of a startup, which create expenses that cannot be met. This leads them into a vicious cycle of more and more fundraising, and the startup is consequently slow to break even.
Devise your concept before looking for investors
‘You have to walk before you run,’ Vardi said, whose own experience supported the report’s findings. ‘You should first raise a little bit of money and then do the proof of concept. Only once you know the proof of concept should you go to raise more money. You cannot replace one nine-month pregnant woman with nine one-month pregnant women; it will not generate a baby. It takes time. You have to build, to think, to establish and only then you have to go and raise money. This is very important. (This position) is not intuitive, maybe, but it is supported by research.’
Investors that ‘meddle in your business will create too much disturbance.’
Once you have developed a product and found a team, the next logical step is to look for investors. But not just any investor will do; it is important to consider the role the investors should take. The Genome research found that investors that ‘meddle in your business will create too much disturbance.’ Instead, regarding advice and input, startups should find suitable mentors. These mentors can act solely as mentors or as mentor-investors, but an investor who is not qualified to be a mentor will consume a startup’s time and give wrong advice.
Increase serendipity and collaborate
The most important component in the success of a startup though is, unsurprisingly, luck and serendipity. The key therefore to increasing the chances of succeeding is to increase luck.
‘You want to be lucky? Don’t sit there and wait for it, go and search for it,’ urges Vardi, and adds, ‘when Goddess Fortuna knocks on your door, it’s better she doesn’t find you in the toilet.’
Vardi then asked the audience to recall the famous quotation from Newton: ‘If I have seen further than others, it is by standing upon the shoulders of giants’; meaning that people never do things completely on their own. Instead, people should collaborate and learn to rely on other people. By aggregating a community around yourself, you will always need collaboration from other people. ‘Don’t sit in your basement, alone, out of touch from the rest of the world.’
Startups should aim to have a social thread
Now more than ever, we are presented with opportunities to be social online, which is a surefire way to spread the word of your product. Include family and friends and enter into dialogue about what you’re doing. Use forums and social media to invite others to join. ‘Always think about how to thread your product with social components.’
‘The two basic things that people want (which wasn’t very well understood at that time) was to be attended to and to attend to each other.’ Regardless of the type of space you’re working in, be sure to add a social component.
Your user is not just your customer
‘You have the money, you have the team, you have the idea, you begin to walk, and now I want to say a few words about the users, (who are) the most important ingredient in the success of the life of a company (…).’
Users on the internet are not just the consumers of your product, they are five 'personalities' bundled into one body. First of all, the user is, quite simply, your customer. Second, with intelligent planning and development, the user is also your distributor, and a vessel to launch your product into new waters and create virality, an invaluable resource for companies of all sizes.
Virality was a key factor of the success of ICQ, which after a few months, started to attract around 100,000 new users each day; a phenomenon that has continued, according to Vardi, for 16 years.
‘We love to make the comparison now,’ he said. ‘At that time, most of the promotion was done by direct mail. (A letter cost) 80 cents to send to one new user, and the conversion rate was 1%. In order to get 100,000 new users, you needed to send 10 million pieces of mail - which is equivalent to 8 million dollars per day of direct marketing. If you know this, you will understand the power of viral marketing.’
