English Teacher & Social Entrepreneur – MatthewAlberto.com

Personally, I think David Heinemeier Hansson (DHH) is correct when he says that the VC, angel investment is a gamble, and that entrepreneurs should be very careful when taking money from investors. DHH is the founder of Ruby on Rails and Partner at 37Signals. I recently listend to an interview with DHH on a podcast, and I’ve been listening to DHH’s thoughts and philosophies ever since I started on my own entrepreneurial journey.

Bootstrapped Business VS Angel/VC-Funded Startup

When I was just starting out as an entrepreneur, I would listen to DHH’s point of view of the long-term, sustainable, profitable and bootstrapped business, and I would compare it with the view of actual angel investors, venture capitals and the general startup media’s portrayal of the hero entrepreneur who gets millions of dolars of investment.

My first ventures would all be bootstrapped. But as my startups gained traction, I did try out the angel, VC-route.

My most recent startup originally gained traction on a very smal team withe bootstrapped funds and a few grants. Nevertheless, when I joined an incubator, the pressures of getting an angel or VC investment started to influence me, and i thought: “Why not take the money?” And I did pitches in front of investors, met up with investors for coffee at their offices for “chats”, and eventually we did take money from an investment firm.

1) We were distracted with chasing money, rather than focusing on building value

While the experience was very useful to understand how to pitch, raise money and woo investors, I think we did waste alot of time trying to get money instead of actually building the business and providing more value to customers. DHH is right in that you lose focus and raising money ends up being like a “drug”, and you always are trying to get a bigger and bigger hit (infusion of cash from investors).

2) Investor has different values & agenda to us

What really bothered me in the end thought was not so much the waste of time, but what irked me was that the investor we ended up going with actually had different values to us. Not only that, they tried to heavily steer the direction of the company even though their number of shares was minimal and I felt they actually had no personal experience in certain matters that they were so adamant about. It felt as if they thought they knew the business better than we did, even though they had no entrepreneurial experience nor no experience in the field of the business. The investors really pushed us to make short-term profits and hitting those targets instead of considering about building long-term value for customers. They also forced us to make certain hires that was in their interest, but not in the interest of the business.

3) Investor did NOT help us when we needed it, even though it would have been so simple for them to do so

Furthermore, whenever we asked them for help, they never gave it. For example, we knew they had some contacts with certain clients and I asked them for an introduction and they said they would arrange it, but never did. That annoyed me. More and more we questioned their value to us. They couldn’t even do basic tasks such as following up something they said they would do to help us, and yet they would totally flip if we had different opinions to them and wanted to do other things our way. The attitude seemed to be that the investor just wanted to give us money, then dictate for us what to do, and then not even genuinely help us wout when we needed it. I now see the value of smart money, and if I were to do it all over again, I would not take their money. I would rather take investment from someone who truly would help us (at the very least, if it was simple for them to do), and to give us advice because they actually had first-hand experience as an entrepreneur in the same field as my business.

Can You Build a Profitable, Fun, Bootstrapped Business that Lasts 10+ Years?

Having sold that business, and having a few months break of reflecting on it all, I’m ready to move on and try another venture. This time around, though, I will take on DHH’s advice to go at it alone, bootstrap, and focus on a business that I am personally passionate about, without having to chase money and investors and getting tripped up by the whole vicious circle and reliance on funding. I’ve started businesses in a bootstrapped fashion, but never grew and sustained them over 10+ years, which DHH has done. I wonder if I can do it, and that’s what I’m aiming to do now as I move forward.

Are you stuck trying to figure out how to come up with a business idea for your next startup? This post will help you, based on my current experiences tryin to figure out a new business that I will launch.

Take Time to Think Through Your Business Ideas

In my post yesterday, I talked about how I recently sold my previous startup business, and I am now in the process of transitioning to move on to another idea. So this post is just as relevant for me right now as it is for you.

I’ve been reflecting on what sort of things I want in my next venture. What sort of factors should I consider for it? What makes it a good business idea versus one that will suck and won’t work?

3 Factors For Your Next Business Ideas

Here are 3 things to think about to help you brainstorm some business ideas for your next startup:

1) What are Your Passions & How Could You Turn That Into a Business?

Think about what you are passionate about. What gets you excited? What turns you on? Do you have a hobby that fixates your mind and attention? And what if you somehow turned that passion into an actual business?

It’s certainly not impossible. That’s something that I am personally trying to do right now. I love languages!!!!! So for my next venture, I am certainly thinking of ways to get into the language learning industry because I feel that I naturally am inclined in this area, and I would do well in it compared to others who aren’t passionate about it.

2) What are Your Skills & Connections & How Could You Use Them For Your Startup?

Consider your skills and connections. Even though you may be passionate about something, you may actually suck at it in terms of your skills. So another area to be brutally honest with yourself is in regard to your skillset, and your connections.

I’ve actually been learning languages for 10 years, and am very familiar with all the different ways to learn foreign languages. Not only that, I recently began teaching English in foreign countries to high school students, businesspeople, diplomats and lawyers. Therefore, I have skills in learning and teaching languages and I also have a number of networks and connections in the field.

3) What are Markets or Industries That Fascinate You & What’s Their Market Size

You MUST think about the market you’re going to get into and its market size. This is very important. It’s crucial in fact. Don’t just be selfish and consider your personal passions and skills. Also, take into account the market that you will help with your passion and skills. The market must be big enough.

If you don’t know how big your market is, you can check out this 5 minute sniff test to quickly sniff out whether your proposed market is big enough and has profit potential.

Don’t Waste Your Time on Startup Ideas That Will SUCK

Overall, there’s a bit of an art and a science to coming up with business ideas. Just consider these factors to get you started and to screen your ideas so that you don’t get too overwhelmed. Screening your ideas in this fashion can also help you to save time and money!!

Should you quit your startup or keep going? This is one of the saddest posts that I’m writing, as it signals defeat of my startup and also personal failure. But this is an informed-kind of defeat, and it is an important decision to make, because you don’t want to waste your time and your life on a startup that is essentially dead or part of the “walking dead”.

It Feels Hard to Quit A Startup You Built from Nothing

Recently, I’ve sold my startup business operations in Latin America. I’ve had to let it go. I’ve also chosen to wind down to a slower pace the operations in Australia. This is so hard to write about, and my heart and soul feels so burdened just by writing about it.

Why?

Because I spent the past 3 years or so building the startup with my all: My blood, sweat and tears. And now I have chosen to let it go. If you’re a startup founder or social entrepreneur who has built something from scratch and later have let it go, you can empathise with me.

5 Reasons Why You May Want to Quit Your Startup Now

If you’re pondering about potentially letting go of your startup too, either to sell it, stop it and move on to something else, then here are 5 reasons why you may choose to quit. I’m writing this because, like me, you may be so internally torn about whether or not to do it. Hopefully this helps you

1) Too much stress/unhappiness

Entrepreneurs and founders are often portrayed as heroic, unbeatable figures. But we’re human too, with flaws and feelings.

If you feel that your startup is bringing more negative stress that makes you feel depressed and screws up your body and mind (not in a positive way that challenges you to be better), then it may be time to let it go.

This was how I was feeling with my startup operations in Latin America. Investors were taking our startup on a different direction to what I wanted, and I felt so conflicted and unhappy.

We felt it was better to start fresh and cut ties with that investor than to keep going – in order to stay true to ourselves.

2) Not profitable

If your startup has been operating for a number of years, and you STILL have not figured out how to make it profitable or sustainable to keep it going and growing at a scalable pace, then it may be time to let it go.

As much as my startup helped thousands of people, and helped raise more than half a million dollars in fundraising to help families with their medical bills, it never reached a level of profitability and scale that could take it to the next level globally.

3) Too much competition

As you’ve been working on your startup, you may also find brutal competition. You would be fighting an uphill battle against the competition, and that’s what we found in the overly crowded crowdfunding space.

4) Better idea

Your current startup may also be involved in a relatively small market or a market that has several disadvantages. As you work on it, you may actually discover other markets that are much larger and easier to penetrate.

5) No passion

Finally, another strong mark of whether you should quit is if you have lost your passion for the business. Are you dragging yourself to work?

I loved the work of our startup because we impacted so many lives. I just didn’t like the fact that our investors in Latin America were forcing us into the wrong direction for it, and were focused too much on the short term profits rather than the long term value that the service could provide. It made me feel so depressed, and I began to slowly lose my drive and passion for it.

Is Selling a Startup Success?

Some would say that selling a startup would be a success, but for me, the startup was such a personal expression of myself that I wanted to grow it and help much more people than I did.

So, while it was great to sell it, I felt there was still so much more that we could have done with it, and so much more people I wanted to impact and help. In that manner, I feel it didn’t reach its full potential – or perhaps, I feel that I myself didn’t reach my full potential yet with it.