When
Survey Monkey acquired the Florida-based online form maker Wufoo for $35
million, the angel investor in the company, Paul Bucheit, made a 29,561 per
cent return on his investment.
That’s an
incomparable figure against the average of 676 per cent return by a start-up in
the US.
The
10-member team and the leader of Wufoo must have done something right to reach
there.
The
founder of this Y Combinator-backed company, Kevin Hale, later on joined the
start-up incubator as a partner.
The man
himself was in Seoul a few weeks ago and shared the recipe of building a
billion dollar business.
There's
no secret sauce but definitely certain key elements and few processes to make
the path easy.
Over the
years, Y Combinator has nurtured 1400 founders, including successes like Airbnb
and Dropbox.
As a
partner at Y Combinator and a successful entrepreneur himself, Kevin knew the
dos and don’ts to carve out one’s way to the billion dollar club.
Here are
three most important things start-ups need to work on if they’re chasing the
billion dollar dream:
Clarity of idea
On the
demo day of Y Combinator, 75 participating start-ups get only two minutes and
30 seconds each to present.
Only with
a clear picture in mind about the business, a start-up can present in that
period effectively.
This
quality is built in the teams (founders) by the following exercises:
Group
office hours
Many
start-ups (~10-20) are seated in a room where everyone tells about his/her start-up.
After
this, people are asked about what the first start-up does and similarly about
others as well.
It is
obvious that if someone lacks clarity of his idea, it will be tough for him/her
to make others understand and remember, and vice-versa.
This exercise
is repeated till everyone gets what everyone else does.
This
ensures that in the future, everyone, including the investors, users,
employees, and shareholders, get the idea correctly.
Weekly
dinners
This gets
entrepreneurs answer some of the most important questions about their start-up
like 'What is it', 'How it works', 'Where/When/Who are going to be part of
journey', and 'Why it will become big'.
It's
crucial to lead with 'What' and not 'Why'.
Answers
should be concise and conversational, and exclude any jargon or preamble.
Remember
that a clear idea is the foundation for growth.
Focus on numbers
These are
not just any numbers but the Key Point Indicators (KPIs).
Build
stuff and talk to users.
Also,
focus on one of the KPIs and target a 10 per cent weekly growth.
An
entrepreneur should also know the exact numbers to the following questions all
the time:
- How much money
do you have in bank?
- What is your
revenue?
- How fast is the
revenue growing?
- How much are you
spending (the burn rate)?
- How much runway
is left?
- Once the number
is known, the focus can be shifted to work on how big it can get.
Big Vision
Only one
thing can be predicted about an idea and for that it has to be taken to the
extremes.
Once
tested, one can say if the path taken is right or an adjustment is required.
Regular
interactions with inspiring people (the success stories you look up to) teaches
to dream big.
The
definition of big has to be ambitious and aspirational enough to change the way
an industry is looked upon.
For
example, how Facebook has redefined the social media and the way brands look at
customers, or what Airbnb did to the travelling and accommodations market.
Kevin
signed off with the signature statement emphasising on the power of saying no.
You have
to say 'NO' many a times to get to a billion dollars.
Of the
above three, how many have you got right?
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