Breakthrough Entrepreneurship by Bill Murphy Jr & Jon Burgstone

Author:Bill Murphy Jr & Jon Burgstone
Language: eng
Format: mobi, epub
ISBN: 9780983961123
Publisher: Farallon Publishing
Published: 2012-11-15T14:00:00+00:00

BUSINESS EXAMPLE: BUILDING CREDIBILITY

Two classmates and aspiring entrepreneurs, Jenifer Carter Fleiss and Jennifer Hyman, were eating lunch together. They’d spent a lot of time over the past few months talking about potential business ideas, and now they’d hit an idea they thought was perfect. Hyman described how she’d commiserated with her sister over the high cost of a dress she wanted to wear to a wedding. Suddenly it had hit her: Why can’t women rent expensive clothing for special occasions?

Over the next few weeks, Fleiss and Hyman surveyed young professional women they knew—in other words, their potential customers. They reached out to alumnae who had become entrepreneurs and asked for advice, and they realized they had a possible introduction to one of the stars of the U.S. fashion industry, designer Diane von Furstenberg. It was an extended, friend-of-a-friend-of-a-friend connection, but they did everything they could to get von Furstenberg’s personal email address. Simply meeting with her was a coup in and of itself.

By attracting people like von Furstenberg as advisers and potential business customers—and managing to convince a partner at the law firm of WilmerHale to take them on for free until they were able to raise money—they were able to pitch to Bain Capital and raise a first round of venture capital with the firm.

Their new company, called Rent the Runway, opened its virtual doors. Within 18 months, the company employed 31 people, had been featured twice in The New York Times, had raised two rounds of venture capital, and was doing great business.

Fleiss recalled that in chasing after those small wins, like winning over von Furstenberg, “both of us had developed the ability to hear no 500 times, and say, ‘okay, maybe next time.’”

Each new, highly credible person who became involved made it more likely that yet another new, highly credible person or organization would be interested.

RAISING MONEY

Raising money can be an effective (though delicate) credibility milestone. Too many entrepreneurs seem to think that their goal as a founder is simply to attract investment, especially at the venture capital level. But simply raising money is never the end state of any compelling business. The goal instead is to develop a profitable venture, which requires profitably serving customers’ needs. In fact, focusing exclusively on investment goes against the mantra we’ve returned to throughout this book: Maximum information for minimum cost.

Attracting investors is rarely as easy as people think it will be but, paradoxically, there are probably more sources of startup capital in the world now than ever before. We’re living in what many investors consider a low-return financial world. Wealthy people and institutions have been placing their money in safe, low return investments like government bonds. Fundamentally, investors seek the best risk-adjusted returns, so if you can offer something solid and interesting, you’re in better shape than you might think.

It’s also important to consider what we might call the “quality” of your money and the degree to which raising money from particular investors can bolster your credibility. Like the

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