Source of image: https://unsplash.com/de/fotos/zP80MWApkn8

Let‘s first establish a definition of what an entrepreneur actually is. According to Cameron Herald, an american consultant and author, he is a person who organizes, operates and aussumes the risk for a business venture. [1]

Taking into consideration the founder‘s pledge there are certain behaviors a founder should try to emulate in order to succeed [2]. Such as the following:

• To do everything in his power to drive, build and pursue progress and change
• To fail again and again until he succeeds
• To make short term sacrifices for long term success
• To always keep his word

Successful entrepreneurs have specific characteristics, which can be summarized by being action oriented and having a deeper personal connection to their work, while staying mentally flexible and balancing progress with curiosity. [3] [4] [5]

A fitting quote in this regard comes from Dan Ariely, who is an american psychologist and wrote the book „Predictably Irrational“ on human behavior. He said, that giving up on our long-term goals for immediate gratification is procrastination. Entrepreneurs could therefore be described as people, who manage to procrastinate less and make their long term goals happen. [6]

Nonetheless unpredictable factors play a huge role as well, as Ken Hendricks, an american self made roofing billionaire emphasizes. In his opinion, the most overrated skill is skill. Luck is more important. The entrepreneur gets credit for being this genius, when really he was just at the right place at the right time. [7]

At Y-Combinator, the world’s most famous startup accelerator, the term “startup” typically refers to a small, early stage company, which is designed to grow fast, assuming up to 500-100x growth in a year. [8]

Source of content: Bill Gross. (03.07.2023). The single biggest reasons why startups succeed. https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_start_ups_succeed?language=so

According to Bill Gross, a well known american investment fund manager, the most important factors of startup success are idea, business model, team, timing and funding. His research has shown, that amongst those the timing seems to have the biggest impact on wether a startup succeeds or not. [9]

The question that comes up now is “So what?”. It is nice to know, that founders are action oriented people and that startups are defined by their potential to grow exceptionally fast, but what am I supposed to do with this knowledge? If timing is the biggest success factor, how do I actually know if the timing is right? That’s why we are now headed towards more specific advice - stay tuned!

As a general mindset it is important to understand that problems equal opportunities to develop innovative ideas and solutions. The larger the problem you are solving with your idea, the better. Try to find problems that not only come from your own experience, but matter to people at a larger scale.

Source of image: https://twitter.com/eriktorenberg/status/1243820695047421953?lang=de

One possible way of generating startup ideas is the SCAMPER-method [10]. It is particularly useful when using an existing process or product, that a lot of people are currently not satisfied with, as a basis. SCAMPER is an acronym for the following elements:

• Substitute: What can be replaced?
• Combine: What can be combined?
• Adapt: Are there similar situations from the past?
• Modify: What change can be introduced?
• Put to another use: What else could it be used for?
• Eliminate: What could be omitted without affecting function?
• Rearrange: What could be rearranged (activity, person, process)?

Try to come up with a lot of answers to these questions. The goal is to go for as many ideas as possible. Other methods I’d like to mention include Brainwriting, Bisociation and leveraging “How might we…?” questions for brainstorming.

Source of image: https://unsplash.com/de/fotos/7esRPTt38nI

As a last step of ideation it is necessary to select the idea(s) you’d actually like to develop further and go from diverging to converging thinking. You could use the 100, 20, 5, 1 technique to do this [10]. 100 is a rule of thumb for the amount of ideas you should have generated in total. You should then reduce the list to 20 high value ideas on your own, while talking informally to friends and potential customers to get the list further down to 5. After further testing and implementing these five ideas, the rule of thumb says, that four of them will fail, while 1 successful will emerge.

Possible steps you could take for validation will be outlined now.

The first step of validation would be to conceptualize your idea and to think about all the factors needed to make your business work. A useful tool for this is the business model canvas depicted below. [11]

Source of image: Osterwalder A., Pigneur Y. (2011). Business Model Generation: Ein Handbuch für Visionäre, Spielveränderer und Herausforderer.

Going from there you aim to find the hypotheses the successful implementation of you business model depends on. For this you look at all the different factors you defined beforehand. The identified hypotheses can then be divided into things you can learn from the market (analogs) and things that are original and new and cannot be learned from the market (antilogs). [12]

Source of image: Osterwalder A., Pigneur Y. (2011). Business Model Generation: Ein Handbuch für Visionäre, Spielveränderer und Herausforderer. Own Illustration [Lennart Mayer]

Determining the truth of analogs is a matter of conducting research, as the necessary knowledge already exists. However, when it comes to the truth of antilogs, where knowledge is absent, experiments must be designed to fill the gap. To approach this, you begin by mapping your antilogs based on their significance to your business model and the uncertainty surrounding their validity. This mapping process helps you identify the areas to focus your testing efforts on. [12]

Source of image: Own Illustration [Lennart Mayer]

In designing experiments to test antilogs, you typically employ a method of testing, such as quantitative analysis or qualitative feedback, to gather relevant data. Additionally, creating a prototype or visualization of your intended product or concept allows for user interaction and feedback. Establishing a threshold or criteria for verification or falsification of the antilog ensures that you don't delve too deep into unnecessary details. The goal is not comprehensive understanding but rather making educated guesses about the truth of your business model and its components. [12]

According to your level of information about the antilog you design your experiments either for exploration (low level of knowledge) or validation (high level of knowledge). A typical experiment designed for exploration would be customer development interviews, while a typical experiment for hypothesis testing would be a landing page. Experiments also differ according to their level of effort and believability of information they generate [13]. The picture below shows this relationship.

Source of image: Rimalovski F. (2018). Testing with humans

Bortolini et. al. (2021) summarized the validation process like this. After formulating your hypotheses and testing them you’ll always have four options: Give up, escalate (if it looks promising), refine and iterate once more or to pivot. [14]

Source of image: Bortolini, R.F., Nogueira Cortimiglia, M., Danilevicz, A.d.M.F. and Ghezzi, A. (2021), "Lean Startup: a comprehensive historical review", Management Decision, Vol. 59 No. 8, pp. 1765-1783.

York & Danes (2014) have identified several biases that could jeopardize the validation process, when following the outlined strategy. They can be summarized as Selection Bias (seeking information from friendly confirmatory sources), Representative Bias (generalizing from small, non-random samples), Acquiescene Bias (respondent’s tendency to give the answer the entrepreneur wants to hear), Confirmation Bias (interpreting information to confirm prior beliefs), Overconfidence Bias (overestimating the precision of customer suggestions) and Optimism Bias (the entrepreneur’s belief, that he/she is unlikely to fail). [15]

These should be kept in mind, when following the outlined validation strategy. Apart from that there are steps that simply belong to the necessary due diligence process, when evaluating a business idea. These include understanding the competitive landscape, outlining a minimum viable product and building a financial model, which basically describes the cost and revenue tiles of the business model canvas in more detail. [16]

In order to answer the question in regards to the timing, which was identified as the most important success factor by Bill Gross, the competitive landscape is the most useful tool. If you identify several well funded startups in your niche, you are probably too late. If you on the other hand detect a few bootstrapped or pre-seed startups it is actually a good sign, as you can learn from your competitors and as they validate your market. [17]

Source of image: Own Illustration [Lennart Mayer]; https://unsplash.com/de/fotos/cK2UBBg4JI4

Source of image: https://de.slideshare.net/dmc500hats/top-10-term-sheet-hacks-naval-ravikant-venturehacks-presentation

Venture Capital firms, invest money into startups to make a financial return [18]. They usually look for the following [19]:

• A great team that has a complementary skillset and solves a real problem
• A big market, ideally in the + 1. Bio. € range

Furthermore you’d need a great pitch to convince an investor. Guy Kawasaki’s “The only ten slides you need in your pitch” are a great resource for this, which I recommend looking into.

The five factors of persuasion might also help you in a negotiating funding [20]. They consist of:

• Reciprocating
• The human need to return favors
• Consistency
• The human need to save face and act consistently with how one has acted beforehand
• Social Proof
• The likeliness of acting in a way that others have acted like beforehand
• Liking
• The truth that business decisions are often also influenced by sympathy
• Authority
• The truth, that status symbols or titles work on a subconscious level

For example it might be beneficial to have someone with a Ph.D. or a professor as an advisor on your pitch deck. Another tactic might be to signal existing interest of other investors and to create fear of missing out.

As a startup you need to do OODA faster then your competitors [21]. OODA is a framework from combat flying and refers to observe, orient, decide and act. If you can do that faster than your competitors you are likely to outperform them. More information in the video:

Source of content: Amy Wilkinson. (03.07.2023). The secret of how to think like an entrepreneur. https://www.ted.com/talks/amy_wilkinson_the_secret_of_how_to_think_like_an_entrepreneur