The Vine and Luma app purchased by Twitter and Instagram are two products that the three -person team only acquired in their first year of operation and at substantial value.
GUEST BLOG. But no, I’m not announcing here that I’m leaving Connect & GO. On the contrary, I have a firm intention to take the company to its next stage and exceed the 100 million dollar bar in capitalization over the next two years. However, after nearly five years at the head of the company, I sometimes wonder about my next entrepreneurial adventure.
Many successful entrepreneurs always aim higher at their project. I think, for example, of my friend Mohannad El-Bachir of WRK.com who, after selling SweetIQ, a local marketing platform to USA Today, just finished a financing round of over 55 million dollars. Sure, the news is bombarding us with start-ups that have just been funded by millions of dollars or acquired by a tech giant of billions. Everyone gives the impression that this success is easy to achieve, but forget that in reality, they need enormous funding and enormous risk-taking to achieve this status.
Talking to some entrepreneur friends who have had success on varying degrees, most have the same observation: they may have benefited from putting their energies into a micro-start-up rather than chain fundraising to by betting everyone on the run.
As a resident entrepreneur with several incubator-accelerators, I’ve worked with so many start-up founders who think the only way to succeed is chain funding until the company is worth more. a billion dollars and therefore, focus all their actions on “burning capital” to increase value.
Not trendy, but a good idea
Although there is no official definition of what a micro-start-up is, they generally have a few points in common, including the fact they are run by a team of less than 10 people and they only need a small investment to get started. . The goal of a micro-start-up in general is to quickly generate revenue.
Often, micro-start-ups grow quickly without needing large teams to make money. These ideas often help solve a big problem that users want solved and are willing to pay for.
What is interesting about the concept of micro-start-ups compared to a typical start-up is the intention to make money. Revenue is often not the goal of some start-ups (especially those working on innovation, deep technology, etc.), but it is the primary goal of a micro-start-up.
In fact, micro-start-ups have the ambition to solve an easy problem that people are willing to pay for. Often, micro-start-ups are not looking to solve a problem that will change the world (the whole thing often costs too much capital and requires fundraising), but rather tedious problems that people are willing to pay!
Aside from the option of creating a profitable start-up that generates attractive income for its founders, another option is to create a start-up with high product and technology potential, but in general it was sold before it was necessary to make the first fundraiser or at least, quickly afterwards, without too much dilution for its founders.
For example, at Connect & GO we were profitable in the first five years of the company’s existence. About three years later, we received the first offer to buy from a Canadian event player for approximately $ 8 million. At that time, we had very little debt and no dilution of our capital. We did not pursue the transaction because we were sure we could take the company to another level. Good decision in this case, given our strength, our ambition and our confidence in the project. However, let’s be honest, to get the same return now after over 12 million in fundraising, you have to sell the company for over $ 40 million.
The Vine and Old app was purchased by Twitter and Instagram. Both of these products only have a team of three people and are acquired in their first year of operation and for a substantial amount.
I can’t count the stories of entrepreneurs who received very good offers early in the process and often refused, believing it would be easy in fundraising to become a “unicorn”. Honestly, most of these entrepreneurs are remorseful now – despite being a great learning curve.
For my part, I think my next projects will have a planned release in the first three years.
What problem will you face?
There are so many problems around us that people create their own ad hoc solutions every day. Often, we are willing to pay a few dollars a month just to avoid the time it takes to fix these issues.
I can personally name a ton of problems I have every day that I am willing to spend money on fixing.
So why not start digging to see what you can build with your current knowledge. Remember to keep it simple and stick to solving a problem that people are willing to pay for. And if after a year, a player makes you a redemption offer, think carefully about the opportunity cost and if it’s not yet the right time?