A startup isn’t a smaller version of a big company, it’s a search for a sustainable business model

All too often, people want to see entrepreneurship as if it were an action movie. The hero, transformed by a great moment of epiphany, champions his idea despite being besieged on all sides by those who seek to thwart him. He prevails in the end by being loyal and true and never wavering from his initial vision.
That’s a dangerous fantasy. As Silicon Valley startup guru Steve Blank has often noted, a startup is essentially a search for a sustainable business model. It’s not like an episode of Mission Impossible, where you have a clear and concrete objective and execute a plan with split second precision.
In fact, it’s more like a role playing game. There are certain rules to play by, but no clear path forward or ending sequence (except, of course, for bankruptcy). Instead, you have to progress through a series of challenges while gaining experience and artifacts along the way. In the end, everyone needs to forge their own path, but here are four things you should know going in.
1. Develop A Customer Before You Develop A Product

Many entrepreneurs treat a new venture as if it was a smaller version of an existing business. You develop a product, identify a market and sell to customers. In the Mission Impossible version of entrepreneurship, once you come up with a trailblazing idea, all that’s left is to execute your plan effectively.

In the real world though, your idea will almost always be flawed in some way. So by developing a fully featured product before you test your idea with real customers, you will almost certainly end up wasting scarce resources. Then, you’ll find yourself scrambling to correct your mistake before you run out of money.

There is a better way. Consider the case of Nick Swinmurn, a young entrepreneur who thought he could sell shoes online. To test his idea, he took some pictures of shoes and built a bare bones website. When someone ordered a pair, he went to the shoe store and bought whatever he needed to fulfill the order. He lost money on every sale.
Clearly, that’s an incredibly stupid way to run a business, but it’s an ingenious — and incredibly cheap — way of testing a business model. The business Swinmurn built, Zappos, was acquired by Amazon in 2009 for $940 million,
2. Your Idea Has Probably Been Done Before

For most of his career, Jim Allison had been content to be a research scientist and had earned some renown in his field of immunology. But in the mid-1990s, he had a breakthrough idea that would change his path. His research suggested that there might be a way to unleash the human immune system to fight cancer.
It was more than just a vague concept. He had done studies on mice that had shown incredible results. They were so impressive, in fact, that he felt he simply had to get the research translated into an effective treatment. So he started going around to all the big pharmaceutical companies to try to get them to invest in clinical studies.

He had no takers. The problem wasn’t that his idea was too radical, but rather that they has seen so many similar ideas before. In fact, there had been hundreds of trials on immunological approaches to cancer and they had all failed. Many agreed that Allison’s approach held promise, but after being burned so many times, no one was willing to take another plunge.
It took three years and tons of heartache, but eventually Allison got a small biotech firm, Medarex, to invest in his idea. Today, Cancer Immunotherapy is considered a miracle cure and many believe that Allison will receive a Nobel prize for his work. Medarex was acquired in 2009 by Bristol Myers Squibb for $2.4 billion.
3. Your Idea Needs To Combine With Other Ideas

When Elance was founded in 1999, it seemed like a really good idea. Taking its name from a Harvard Business Review article titled titled The Dawn of the E-Lance Economy the founders sought to match freelance contractors and firms much like Monster.com did for full-time applicants. Unfortunately, the it didn’t gain any traction.

So the investors decided to hire a new CEO and take the company in a new direction. Instead of matching firms to freelancers, it would help companies manage relationships. This idea met with much greater success and E-Lance became a pioneer in vendor management software. In fact, it became so successful that it attracted stiff competition from the likes of SAP and Oracle.

At that point, the investors felt it was time to sell, but the new management team thought that they could build an even bigger business by combining the two ideas — matching freelancers to firms and helping to make those relationships successful. So they sold the software business and kept the brand name, a small staff and some intellectual property.

In the years that followed, those two ideas combined with even more ideas. The firm partnered with training companies to offer accreditation of specific skills, helped its customers build “private clouds” of preferred contractors and developed algorithms to create better engagements. In 2013, it merged with oDesk to form Upwork, the world’s largest freelancing platform.
All too often, people want to see entrepreneurship as if it were an action movie. The hero, transformed by a great moment of epiphany, champions his idea despite being besieged on all sides by those who seek to thwart him. He prevails in the end by being loyal and true and never wavering from his initial vision.
That’s a dangerous fantasy. As Silicon Valley startup guru Steve Blank has often noted, a startup is essentially a search for a sustainable business model. It’s not like an episode of Mission Impossible, where you have a clear and concrete objective and execute a plan with split second precision.
In fact, it’s more like a role playing game. There are certain rules to play by, but no clear path forward or ending sequence (except, of course, for bankruptcy). Instead, you have to progress through a series of challenges while gaining experience and artifacts along the way. In the end, everyone needs to forge their own path, but here are four things you should know going in.
1. Develop A Customer Before You Develop A Product

Many entrepreneurs treat a new venture as if it was a smaller version of an existing business. You develop a product, identify a market and sell to customers. In the Mission Impossible version of entrepreneurship, once you come up with a trailblazing idea, all that’s left is to execute your plan effectively.
In the real world though, your idea will almost always be flawed in some way. So by developing a fully featured product before you test your idea with real customers, you will almost certainly end up wasting scarce resources. Then, you’ll find yourself scrambling to correct your mistake before you run out of money.
There is a better way. Consider the case of Nick Swinmurn, a young entrepreneur who thought he could sell shoes online. To test his idea, he took some pictures of shoes and built a bare bones website. When someone ordered a pair, he went to the shoe store and bought whatever he needed to fulfill the order. He lost money on every sale.
Clearly, that’s an incredibly stupid way to run a business, but it’s an ingenious — and incredibly cheap — way of testing a business model. The business Swinmurn built, Zappos, was acquired by Amazon in 2009 for $940 million,
2. Your Idea Has Probably Been Done Before

For most of his career, Jim Allison had been content to be a research scientist and had earned some renown in his field of immunology. But in the mid-1990s, he had a breakthrough idea that would change his path. His research suggested that there might be a way to unleash the human immune system to fight cancer.
It was more than just a vague concept. He had done studies on mice that had shown incredible results. They were so impressive, in fact, that he felt he simply had to get the research translated into an effective treatment. So he started going around to all the big pharmaceutical companies to try to get them to invest in clinical studies.
He had no takers. The problem wasn’t that his idea was too radical, but rather that they has seen so many similar ideas before. In fact, there had been hundreds of trials on immunological approaches to cancer and they had all failed. Many agreed that Allison’s approach held promise, but after being burned so many times, no one was willing to take another plunge.
It took three years and tons of heartache, but eventually Allison got a small biotech firm, Medarex, to invest in his idea. Today, Cancer Immunotherapy is considered a miracle cure and many believe that Allison will receive a Nobel prize for his work. Medarex was acquired in 2009 by Bristol Myers Squibb for $2.4 billion.
3. Your Idea Needs To Combine With Other Ideas

When Elance was founded in 1999, it seemed like a really good idea. Taking its name from a Harvard Business Review article titled titled The Dawn of the E-Lance Economy the founders sought to match freelance contractors and firms much like Monster.com did for full-time applicants. Unfortunately, the it didn’t gain any traction.
So the investors decided to hire a new CEO and take the company in a new direction. Instead of matching firms to freelancers, it would help companies manage relationships. This idea met with much greater success and E-Lance became a pioneer in vendor management software. In fact, it became so successful that it attracted stiff competition from the likes of SAP and Oracle.
At that point, the investors felt it was time to sell, but the new management team thought that they could build an even bigger business by combining the two ideas — matching freelancers to firms and helping to make those relationships successful. So they sold the software business and kept the brand name, a small staff and some intellectual property.
In the years that followed, those two ideas combined with even more ideas. The firm partnered with training companies to offer accreditation of specific skills, helped its customers build “private clouds” of preferred contractors and developed algorithms to create better engagements. In 2013, it merged with oDesk to form Upwork, the world’s largest freelancing platform.
4. You Don’t Need A Business Plan, You Need A Business Model

For traditional businesses, strategic planning is essential. You need to anticipate demand, allocate resources and coordinate the efforts of hundreds, if not thousands of people. It takes a significant organizational effort to keep things running smoothly and meet the needs of customers, partners and employees.

Yet a startup has few of these concerns. Usually there are just a handful of employees, if any, a few partners and maybe a customer or two, if things are going well. So it’s not a business plan that you need, but a business model — a clear idea of how you will create, deliver and capture value — and there’s no way of knowing exactly what will work going in.
That’s why it’s much more important to explore than predict. Nick Swinmurn didn’t just dream up a new way to sell shoes, he tested his idea before taking the plunge. Jim Allison studied the immune system for decades before coming up with his miracle cure. Elance continually honed and iterated its model before it came up with a winning formula.

So we need to get over the myth of the heroic leader. It doesn’t take superpowers or a magical suit of armor to be a great entrepreneur. Rather, it takes the courage to begin the quest knowing that you’re just a normal person who will have to find a way through to the other side.