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Two Pitfalls Every Aspiring Entrepreneur Should Avoid

CEO at Innovation Department building the next generation of consumer brands. Advisor at Saturn, Act+Acre and Perelel amongst others.

It has never been easier to start a business. Building a website costs a fraction of what it did even 10 years ago. Servers are inexpensive and scale alongside your business. Supply chains, to the extent you’re building physical products, are modularized and have evolved to enable low minimum order quantities, so entrepreneurs no longer need to have huge amounts of capital to invest into inventory. There are more tools than ever to reach prospective customers and sell them your product. Even capital is more plentiful, with pre-seed funds taking an institutional approach to the job that previously only angel investors used to do. In short, nearly every barrier to entry that a decade or two ago might have prevented an aspiring entrepreneur from pursuing their ambitions has significantly lessened. While the pandemic might have slowed progress temporarily, these trends are unlikely to abate.

What is sometimes lost in the otherwise encouraging shift toward more widespread entrepreneurialism is the fact that there are other, contrasting trends that have made it harder than ever to break through and be successful. In short, while it is easier than ever to start a business, it is getting progressively more difficult to actually succeed.

There are many reasons for this, but two are particularly significant.

1. More Competition

The first is the simple fact that there is more competition than before, and often this competition behaves in unpredictable ways. Thirty years ago, in the halcyon pre-internet world, the major competitors of a large business like Procter & Gamble were the other conglomerate consumer packaged goods businesses and the private label brands built in-house by their retail partners. Today their competitors still encompass those two groups but now they extend into the tens of thousands of startups fighting tooth and nail to take market share. Individually, most of these brands are inconsequential relative to a business of Procter & Gamble’s scale, but collectively they can shift consumer expectations around quality, price and services. Small insurgent brands are not merely focused on taking market share from the huge incumbents, but also fighting in the trenches with other brands similar to themselves. This is the case regardless of whether a brand is in consumer goods, software, media or a myriad of other industries. There are simply far more people than ever grappling over the same pie, and some of those people are willing to discard long-held industry best practices to get an edge.

The solution for this problem is somewhat counterintuitive: There is value in figuring out how to be a big fish in a small pond. Most conglomerates with scale choose to play in categories where success can have a meaningful impact on their overall business. Their enormous size forces them to avoid spaces where there is simply not enough potential scale. Similarly, the popular wisdom within the venture capital community has long advocated going after markets where the total addressable market would allow a successful business to become large enough to create a “venture outcome." This usually means exits in the hundreds of millions (if not billions) of dollars.

This means there are often pockets of opportunity that are too small for conglomerates to invest in and actively discouraged by the venture community. These pockets are often thus overlooked by those entrepreneurs who have visions of building the next billion-dollar business, which means there will be far less competition. Many successful businesses have been built in these spaces, winning in the small pond before moving to an adjacent big sea.

2. Gatekeepers

The second challenge is overcoming reliance on the major gatekeepers—namely Amazon, Apple, Facebook and Google (though there are others). For many kinds of businesses, these gatekeepers control access to customers. It is hard to build an app without listing it on Apple and Google’s respective stores. It is hard to market that app without using Facebook and Google advertising, and you're likely to use Amazon or Microsoft for hosting. These gatekeepers will always have far more leverage over you than you will have over them. They have built trillion-dollar businesses by leaving small brands just enough margin to survive but rarely enough to prosper. Within more jaded entrepreneurial circles, it is often joked that a significant amount of venture funding over the past decade has ended up lining the pockets of these huge enterprises.

What to do in response? The answer is not swearing off Facebook or resolving to do no business on Amazon. These are not viable alternatives if you’re focused on maximizing the size and reach of your business. Instead, the answer is usually working with a combination of methods, avoiding overreliance on any single gatekeeper while building your owned channels and investing in developing your audience. Gathering customer emails and phone numbers is core to this approach and is still effective when done right. Placing content on media platforms can be very effective when successful, though it requires significant investment. TikTok and Snapchat now both provide alternatives to Facebook, but are quickly becoming yet another massive counterparty that can exert tons of leverage over the little guys. Ultimately, building your own platforms and audiences, while requiring a great deal of work, will make your business far more defensible and have a significant impact on value if and when you should ever try to sell it.

Final Thoughts

By being mindful of these two simple pitfalls and working proactively to address them, you will put yourself and your business in a far better position for success. Entrepreneurship is hard; don’t make it harder by entering the most competitive categories and relying on the goodwill of giant enterprises whose chief goal is to maximize every dollar they can.


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