Barriers to entry low...barriers to success?

by: Todd Nuckols

As we get ready to launch the Mentor Network and Lighhouse accelerator at 804RVA I wanted to reflect a bit on startup life.  Hopefully a series of posts to follow but I am pretty lazy so who knows!

When it comes to starting a high growth business these days I often read the amazing stories of the little (technology) startup that could.  Started in a dorm room, super-lean, cost virtually nothing, technology little more than a free commodity to be sculpted in a mere matter of hours into a towering force across the wide open internet.  And every time I hear some version of that story I think that for those few winners that can claim that story is it really true?  No barriers...nothing but success and growth!
 
Then I think about recent investment conversations I have had in this little corner of Virginia around startup ideas.  "What are the barriers to entry for your competition?" ..."It seems like you are selling sunshine, anyone can do this!"..."This seems pretty easy to do, how does this make a business?"

So, you stand at this interesting crossroads.  By any comparative standard staking your claim in the tech startup landscape is a pretty cheap proposition!  The capital barriers to entry are low (but not zero, but that is another post for another day).  Yet,  success however is a totally different matter.  

First you need to define it.  Is success achieving enough belief to get that Kickstarter round complete?  Is it being able to pay yourself? Is it closing a large growth round?  Is it becoming a household brand with a billion dollar market valuation? An investment professional recently told me, “Unless you exit your company for at least 100 million in cash it is not a success.” That sounds like a pretty high bar to me!  One I clearly failed to clear in my attempts to start “something successful.”      

So let’s agree for purposes of this discussion on a definition of success.  For the technology startup (which is my focus anyway) I will state success as “a profitable business not driven by direct billing individual talent but a business that has a significant user community, geographically diverse and engaged with its product because it provides real value while producing a profit (or minimally covering all associated expenses)".  


Easy, right?  Fire up that IDE, grab that URL, stick some ads somewhere and you are done.   Better yet just plop a few interesting lines of code in an app and wait for those purchases to pour in.  Yeah, sure…

Reality.  While barriers to entry are "low", barriers to success are high.  And being successful by the definition here is extremely difficult.  


Barriers to success are very real, let's review a quick list shall we...  
Your personal network and influence (the starting point), competition, region, available capital to grow when you try to reach scale, brand awareness, cash flow support (see capital, again), creating sustainable, scalable technology, evolving solutions to assure the fan base stays loyal, identifying the right problem, creating a real path to monetization, developing sales channels, understanding customer experience, engagement, churn, building a team, creating a culture, staying motivated, overcoming that feature or design element that tested well but flopped in production, staying on-line (avoiding the fail whale), avoiding the guy or girl in the next ‘dorm’ room that is about to shift the market, picking partners, picking technology, slicing through the noise of the market, building competitive advantage, staying original, fresh and compelling.  [Your turn to add the next 50 or 60 items]


But look over that list again, in many cases the pundits are right, the physical barriers to entry are low in today’s ‘frictionless’ environments but who are we kidding, really.  

So I salute those who try knowing full well what it really takes!  And for those have that diverse customer base that is actively engaged and paying the full bill,  congratulations!  You may not be in the press every day but that smells a lot like success.

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